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Example research essay topic: Hewlett Packard H P - 1,983 words

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... nt. H-P Chief, Carly Fiorina, 46, is expected to stay as the chairman and CEO while Michael Capellas of Compaq will serve as the president. The merger will result in some 15, 000 job cut-down and the acquisition may also lead to a slight decrease in combined sales in 2002 and 2003. (jpmorgan. com) Carly Fiorina had this to say about the merger: This combination vaults us into a leadership role with customers and partners. Together we will shape the industry for years to come.

This merger is one of the most significant deals among the manufacturers of PCs. The last important merger took place in 1998 when Compaq had taken over Digital for a massive $ 9. 6 billion. The Merger was decided upon after both companies encountered plummeting profits and job cuts during the recent slow-down in the computer industry. Hewlett-Packard had recently slashed some 6, 000 jobs while Compaq was forced to cut some 8, 500 jobs. It has been decided that Compaq shareholders will be entitled to 0. 6325 of newly issues H-P shares for each share of Compaq. Out of the total stocks, H-P shareholders will make up some 64 % while the rest of 36 % will go to Compaq.

The first half of the year 2002 will possibly see the close of this deal, which is expected to result in cost savings worth $ 2 billion in the 2003 fiscal year and some $ 2. 5 billion in 2004. The new giant is expected to accumulate annual earnings of $ 3. 9 billion and will have some 145, 000 employees. Since H-p is taking over, the new giant company will be based in Palo Alto, California, which has been H-P's home for many years now. The company will be divided in four operating units, a $ 20 billion imaging and printing unit; a $ 29 billion device unit; a $ 23 billion information technology infrastructure unit; and a $ 15 billion services unit. PROBLEMS WITH MERGERS AND ACQUISTIONS: Now that it is known that the merger is taking place, let us see what problems the world leader may have to encounter after the acquisition. It is common knowledge that many corporate marriages fail to last for long, because the acquired companies are not as easy to manage as was supposed.

For one the marketing strategies of two companies differ widely, no matter how similar the fields they excel in are, still any two companies can never be the same in their marketing approach. The same can be the case with H-P and Compaq as they have been known for their own unique products and the consumers will be expecting the two giants to produce even better brands, brands that would be just as big and exclusive as the company producing them. Jonathan Angel, a senior editor with industry weekly Technology Marketing supports that speculation saying, There is a big, big danger if they don't execute this quickly, they will lose customers on both sides, they don't know if a product they buy today will be a dead product line or whether it will be supported. This problem has not escaped the H-P Chairman and CEO, Carly Fiorina who presents a solution by proposing that H-P should remain the brand name while Compaq's name will be used for secondary production line. But its easy said than done, as Bernd Schmitt, director of the center on global brand leadership at Columbia Business School puts it: Both are currently struggling, but both are major brand names, to come up with an entirely new name would be extremely risky and cost a lot of money. But the problem with merging names is confusing customers.

The merger, as we already mentioned, has created the biggest PC manufacturing company but the question is, will consumers be impressed by the big name alone? Well that doesnt seem to be the case, it has been noticed before that corporate marriage fail because consumers are confused about the true identity of the brand they are buying and for customers around the globe, this is very important. They need to know which brand they are purchasing, but with merger this may become as problem as consumer would be left wondering whether they bought H-P or Compaq. Even if they are convinced that the brand is exclusively H-Ps, they will not be easy to convince that Compaq wasnt play a role somewhere in the production. Chances are, that consumers will view the products offered by the merged company as a new brand in the market. So what if both H-P and Compaq have been in the market for a long time, this is the first time they are bringing out a products as a combined unit.

While some are skeptical about the new company and how the products would be perceived, some experts of the field believe that the merger may prove very positive and healthy for the whole computer hardware industry. Len Roberts, chairman and CEO of RadioShack, the country's largest electronics retailer, with 7, 100 locations is one such person, Hewlett-Packard and Compaq coming together will spur the next big product cycle, I think the issue the Street is missing is that this is the ultimate bet on broadband. What they are missing is the impact Hewlett-Packard and Compaq could have on broadband and the demand for more powerful platforms, networks and services in homes and small business Though Wall Street did not react positively to the news of the merger, industry experts are viewing the acquisition as a good sign, which might bring some consolidation to the plummeting computer market. Andrew Neff, PC industry analyst at Bear Stearns, went on to say that it would not be that bad if Dell decided to buy IBMs personal computer business or if Japanese companies like Toshiba or NEC take over Gateway Inc. Well that may not actually happen, but then in this industry with its current troubles, nothing is certain and almost anything is possible. Andrew Neff may have been just speculating, when he talked about more mergers likely in the future, it would not be wise to deny the possibility of such a thing ever happening because Andrew was sure in the beginning of the year that H-P and Compaq might cut a deal.

Like many others in the industry, Andrew believes that it would take some time before people can come to terms with the fact that the two major brands have come together. Whenever you have a major move like this, the industry tries to absorb it, and that may take at least a year, " he says. "You could get other moves on a smaller scale in the interim. " Industry analysts are also warning the merged company of possible loss of customers not because of the confusing brand identity but because the big names in the markets such as Dell, Sun Microsystems and Gateway will try their best to cash in on the confusion. They would make all possible attempts to snatch customers while H-P would be struggling with the challenges of the merger. And challenges it will have to face on a global level, for this company is anything but small and therefore the magnitude of problems would be at par with the size of the company. The reasons why companies are thinking of mergers in computer industry are as follows: GLOBAL PERSPECTIVE AND CAPACITY With the companies moving to newer pastures, it is only natural that they face increased competition. Computer industry around the globe is become more and more competitive with many new names emerging every year.

This only scares the giants of the industry, which have been encountering a slow-down for the first time in decades. Naturally, they look out for possible mergers in order to create a name so big that people would be impressed by the size alone. PRICING PROBLEMS TO STEAL BIGGEST MARKET SHARE, LED BY DELL AT THE MOMENT. Mergers are also likely because of the pricing problems.

If two companies merge they feel they can offer more competitive prices and thus steal the biggest market share. This must have been on H-Ps mind too because so far Dell ahs been enjoying the lions share of the market. DECREASING DEMAND AND NOT SO POSITIVE ECONOMY CONDITIONS. Slow-down in the economy is not something new for the companies now, it has become common knowledge that little hope exists for computer industry to rise for some time. In the second quarter of this year, the number of computers sold fell for the very first time in 15 years and this just goes to show that the struggling economy is definitely going to affect the computer industry. And if this was not enough to force the merger, Dell came out to be the only winner as it was able to grow a little while all others were facing stagnation.

It's like any industry in the later stage of its life cycle, Neff points out, referring to the same thing happening to aerospace and automobiles industry some time back. HOW MERGER AFFECTED THE SHARES OF OTHER COMPUTER COMPANIES When the news of the merger came out, it was obvious that the other players in the market will be affected, some more seriously than others. It was clear that the biggest merger of the PC industry was seen as a threat to other existing companies in the industry because the emerging powerhouse is more likely to take over others in PC, server and handheld computer business in a short span of time. Keeping this in mind, investors tried to find out who will be able to survive and who will sink in deeper waters. LOSERS: LEXMARK: This printer firm lost 9 % on the shares fearing that Compaq's merger with the best printer brand in the world might hit this company real hard. Lexmark was formerly a unit of IBM and it had been in business with Compaq, selling ink-jet printers with Compaq brand name since 1998.

John Leo of Northern Technology Fund says, Lexmark could lose to the more robust H-P organization, PALM: There is a strong chance that Palm may suffer badly as a result if the biggest merger. Though the company has been in the business of manufacturing handheld computers for some time now and grosses top market share in this area, there is a possibility that H-P and Compaq's iPaq and Jornada models may well take over the market. SUN MICROSYSTEMS. Bob Turner at Turner Investment Partners is of the view that Sun Microsystems may have to face some decrease in market share as H-P can succeeded in server manufacturing very easily.

WINNERS: DELL: Dell is one company that can sit back and relax while the merger takes place because the companys shares rose some 4 % when the news of the merger came in. With investors believing that H-P and Compaq will be facing so many problems for some time, they may not be able to focus of the PC area where Dell is already the most successful. Though it is clear that Dell will now have a much stronger and fiercer competition at hand, Carl Howe of Forrester Research says, This monster is harder to kill. IBM: IBM is not likely to get hurt by the merger because their role in the services business has been massive and H-P and Compaq have tried to copy the moves of this giant in the past.

Which just goes to show that it will be some time before they can even think of taking over IBMs services shares, if ever. REFERENCES: 1. Timothy F. Bresnahan and Shane Greenstein, March 1999, Technological Competition and the Structure of the Computer Industry 2.

Business Week: Innovation in America, October, 1989 3. Competition in computer Market, On overview By JP Morgan at web industry / pc ind. pdf


Free research essays on topics related to: computer industry, h p, sun microsystems, market share, hewlett packard

Research essay sample on Hewlett Packard H P

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