HP to buy Compaq

Hewlett-Packard will announce tomorrow its plan to take over rival Compaq for $47.5 billion in stock, according to a report in The New York Times.

Executives close to the deal have said one Compaq share will be exchanged for about 0.63 Hewlett-Packard shares, the article claims.

Carly Fiorina, chairman and CEO of Hewlett-Packard, will become chairman and CEO of the combined company, which will be based in Hewlett-Packard's home town. Michael Capellas, Compaq's current chairman and CEO, will become president of the new company, the newspaper reported.

Motives for the takeover have yet to be formally announced. Notably however, in September last year HP attempted to acquire the consulting practice of PricewaterhouseCoopers in an effort to expand its service offerings. The deal, valued at US$17 to $18 billion fell through after HP withdrew its offer in November last year due to HP's dismal third quarter earnings.

In purchasing Compaq, HP will not only gain an expanded services division but will gain a company with a broad range of products and services spanning almost the entire computer market.

Importantly, the purchase will beef up market share in the PC arena for HP - an area in which the company has struggled over the past year. IDC figures for worldwide PC shipments for Q2 of this year had Compaq in second place with 12.1 per cent, behind Dell with 13.4 per cent. HP came in fourth place with only 6.9 per cent, just behind IBM with 7.2 per cent.

HP Australia are declining to comment at this stage. Compaq Australia's media spokesperson was in discussions regarding the takeover and was also unable to comment.

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