A press release just posted on the Hewlett-Packard Web site has confirmed earlier press reports stating the company has entered into a $47.5 billion (US$25 billion) agreement to acquire rival IT vendor Compaq.
According to the release, the merger will create a "US$87 billion global technology leader". This puts the merged company on par with IBM in terms of yearly turnover. For the 12 months ending December 31, 2001 IBM's revenue totalled US$88 billion.
By combining forces, HP will place itself in the box seat in all major IT markets including servers, PCs, handhelds, imaging and printing. It will also bolster its claim as a serious player in management software, IT services, and storage.
"At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners," said Carly Fiorina, chairperson and chief executive officer of HP, who will maintain her current position in the new company.
Compaq CEO Michael Capellas, who will become president of HP under the merger proposal, said: "We are creating a new kind of industry leader. In sharp contrast to our competitors, we are committed to leading the industry to open, market-unifying architectures and interoperability, which reduce complexity and cost for our customers," he said.
Under the terms of the agreement, HP shareholders will own approximately 64 per cent and Compaq shareholders 36 per cent of the merged company. The merged company expects to save US$2.5 billion annually and drive a significantly improved cost structure. Annual revenues of US$87.4 billion and annual operating earnings of US$3.9 billion are expected. It will employ over 145,000 employees.
News of the merger broke earlier today when the New York Times reported that HP would formally announce on Tuesday its plan for acquiring Compaq.
A spokesperson for HP Australia said no comment was currently available and they expected no comment would be forthcoming from HP Australia for a couple of days.
Photograph: HP's Carly Fiorina