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HP swallows up Compaq

Merger creates world's biggest computer firm

Hewlett Packard announced last night it is to take over rival computer manufacturer Compaq in a £17bn stock-swap deal, merging the world's second and third largest personal computer firms into one.

The move is set to shake the dwindling IT market with the new combined companies' operations expected to stretch across more than 160 countries, employing 145,000 people, and producing an estimated annual revenue of £60.5bn as well as fierce competition for current number-one computer firm Dell.

"At a particularly challenging time for the IT industry this combination vaults us into a leadership role," said HP chief executive Carly Fiorina in a press statement as CEO of the combined company. "Together we will shape the industry for years to come."

The new company, which will retain the name Hewlett Packard, will be the largest in the personal computer and printer market and the deal will therefore have to get approval from the monopolies and mergers commission before it can go ahead.

"It does not matter that both companies are American. When we evaluate this, if we see any possible threat to competition in Europe then the merger will not go ahead," said a spokesman at the European Commission.

But the outcome of this merger may be disastrous for staff, with HP and Compaq having already cut a total of 14,500 jobs over the past few months.

Both companies said no job cuts had yet been decided, despite industry rumours of 15,000 job losses, but their joint announcement yesterday that costs would be cut by £1.7bn over the next three years seems to indicate more redundancies are on the way.

"They've got to cut half of the company," Martyn Reynolds analyst at research company Gartner told the BBC. "They can't afford the luxury of being nice."

HP said it had not yet finalised details with Compaq and could not provide Compaq customers with information about guarantees or contracts, despite CEO Fiorina's assurance that HP "understands the magnitude of the challenge and the need for discipline and speed".


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