HP and Compaq claim more support for merger

28 January 2002 Compaq CEO Mike Capellas has claimed that support for its proposed $25 billion (€28.9bn) merger with Hewlett-Packard (HP) is gathering pace. It follows a frantic round of analyst briefings by Capellas, accompanied by a bullish financial forecast for 2002.

Despite racking up net losses of $785 million (€913.2m) in the year to the end of 2001, Capellas has forecast that Compaq will post net income of $580 million (€675m) for 2002 on the back of a recovery in the PC market and further cost-cutting measures.

He also believes that the company will be boosted by increasing sales of higher margin, high-end products, such as Unix servers and enterprise storage. The company says that its managed services business is also expected to boom.

During 2001, Capellas said that the company had reduced operating expenses by $1.7 billion (€2bn), cut inventory levels by $2.5 billion (€2.9bn) and increased direct sales of PCs to the business market by 72%.

At the same time, Capellas took the opportunity to lobby financial analysts and fund managers in a bid to increase support for the proposed merger with HP.

As a result, Putnam Investment Management, Compaq’s biggest single investor and a significant shareholder in HP, has come out in favour of the deal, according to Capellas. At the same time, a number of Wall Street analysts are also indicating their support for the deal, according to a report in the Wall Street Journal.

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Ben Rossi

Ben was Vitesse Media's editorial director, leading content creation and editorial strategy across all Vitesse products, including its market-leading B2B and consumer magazines, websites, research and...

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