HP and Compaq agree $25bn merger

The computer giants Hewlett-Packard and Compaq are planning a $25bn (£17.2bn) merger. The deal would create a company of a size to rival industry giant IBM, which is currently worth $90bn.

Even so, the new giant will have a lower market value than each of the two merger partners had last summer when their share prices peaked. Since then, the value of their stock has dwindled as falling sales and market worries have forced them to lay off several thousand workers and slash their profit forecasts.

Leader

The merger would create a "global technology leader", the companies said in a joint statement. The merger "vaults us into a leadership role with customers and partners," said Hewlett-Packard chief executive Carleton "Carly" Fiorina. "Together we will shape the industry for years to come," Ms Fiorina, who will remain chief executive, said. Both companies' boards have approved the terms of the merger.

Falling sales

If the merger is successful, the new combined units would have annual earnings of $3.9bn, 145,000 employees and operations in more than 160 countries, she added. Hewlett-Packard and Compaq, which reported annual revenues of $47bn and $40bn respectively, have both seen sales decline drastically in the current industry downturn.

Falling sales have slashed the companies' market values. Hewlett-Packard's stock, worth $23.21, is down 66% from its high last summer. Compaq has fared even worse, down 76% at $12.35 from a peak in early 1999,

News source: BBC News

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