HP's Compaq Acquisition (C)

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Case Details:

Case Code : BSTA022
Case Length : 04 Pages
Period : 2000 - 2005
Pub Date : 2005
Teaching Note :Not Available
Organization : Hewlett Packard, Compaq
Industry : Information Technology
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

Introduction

Announced in September 2001 and completed in March 2002, HP's acquisition of Compaq seemed to have run into trouble by 2003. The integration process had taken more than a year. CEO Carly Fiorina had implemented several cost-cutting measures to streamline HP's operations.

Fiorina's large-scale layoff plans had met with stiff resistance from HP's employees. Employees felt that Fiorina should have looked for other ways to cut costs. Many analysts also criticized Fiorina for destroying HP's cherished culture. But Fiorina maintained these steps were necessary to make HP less top-heavy and bring it in line with the industry standards...

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Losing Grip?

HP shocked Wall Street by missing its earnings targets by a massive margin in the third quarter of 2003. Fiorina commented, "I'm very disappointed that we missed our (earnings per share) growth target this quarter due to the confluence of a number of issues that we now understand and are urgently addressing. I accept full responsibility for the shortfall."...

The Road Ahead

In 2004, many analysts felt that Fiorina seemed to have bitten more than what she could chew by attempting a massive restructuring of a company of HP's size and complexity. The Compaq acquisition seemed to have diverted Fiorina's attention. In the process, competition had gained a foothold even in HP's traditional strong segments...

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