Question 1 Using a SWOT analysis, identify the key strategic fits between the two companies. What are the most important expected synergies? Strength Weakness Ability to serve customers at lower cost Compaq was a significant player in enterprise systems and HP in IT services business Wider spectrum of products for its clients through the merger Strong brand recognition, something that takes time to build Highly complimentary R&D Overlapping management Overlapping product lines Diluted interests in imaging and printing which were traditionally HP’s strengths Opportunity Threat The next IBM? (HP was looking to expand its services business through both organic and inorganic channels) Compaq was the market …show more content…
The expected cost synergies (as announced by HP) are approximately $2.5 billion . This amounts to approximately $0.83 per share in the merged firm. The market value of Compaq at the time was approximately $21 billion pre-merger announcement, meaning that a reasonable price for Compaq should be $23.5 billion. So the final exchange ratio price of $25 billion includes a premium of 6.3% or $1.5 billion. Considering that the PC market had matured and was faced with increasing competition with price undercutting by competitors, the price offered by HP seems rather optimistic. (Refer to HP-Compaq key note slides) One of the assumptions is the P/E of 15x to 25x. Is this justified? 0 Is the discount rate of 15% justified? (Look at the back and use beta to calculate). If you calculate it, it seems reasonable. (Beta for HP is 1.5 and 15% discount rate is viable) Revenue loss of $4.1 billion. Where could this come from? ANS: Overlapping businesses and cannibalisation of products and hence natural revenue loss. Question 3 (exhibit 5 – 7 ) Conduct a simple valuation of Compaq. Does your valuation differ significantly from the HP offer price and why? Do you think the offer price is appropriate? Brief background of Compaq: Founded in 1982 its primary strengths are in innovation and its low cost structure of its products which compete with Dell. Its primary business divisions are commercial and consumer PCs, enterprise computing and global services. Its
Netscape grow on an annual basis over the next ten years to justify a $28 share value?
You would not buy a home, car or other large purchases without researching what product offered you the most for your money. The same is true when investing in a company. Investors do avid research on multiple companies to find what company matches the investors' criteria. In this paper Team C will research both AT&T and Verizon's financial documents. Team C will compare selected ratios, cash flow and make recommendations how both companies can manage cash flow for the future.
the company’s margins have shrunk by 10% in the past year due to rising costs and growing competition.
SWOT Analysis: The internal strengths and weaknesses of the company, and the external opportunities and threats from the viewpoint of the company
This review provides an in-depth strategic SWOT analysis of the company’s businesses and operations in the areas of internal strengths and weaknesses and external opportunities and threats. (Sector Publishing Intelligence)
4. AFTER VALUING PARAMOUNT, COMPARE YOUR VALUATION TO THE MARKET PRICE. ARE THEY SIMILAR? IF NOT, HOW CAN YOU RECONCILE THEM?
HP entered into an agreement with Compaq Computer Corporation in September 2001. In this definitive agreement, HP is going to purchase all of Compaq’s common shares outstanding, and pay a total price of 0.6325 shares of its common stock for each share of Compaq’s common stock.
Dell Computer Corporation was founded in 1984 by Michael Dell. From the early 1990s until the mid-2000s, Dell was ranked as a PC market leader relying on their distinctive marketing pattern “Direct Model” which undertook direct communication with customers and provided customized products. Recently, the PC industry is facing inconceivable worldwide competition, and Dell is gradually losing their competitive advantages by using its direct model in critical business segments. The company is facing shrinkage of growth, increasing competition, declining quality of customer service, and limitation of expansion. These issues have an enormous impact on Dell’s position as a technological giant in the PC industry.
Yahoo and google have the Revenue at $73,785,000,000 for 2016 which is a $1,167,000,000 increase from 2015 when they were at $72,618,000,000. However this increase does not continue into the income statement on 01/28/17 where their revenues fell to $69,495,000,000 which is about a 6.17% decrease as compared to the 1.61% increase from the prior years. Even 2014 to 2015 saw an increase in revenue of $1,339,000,000 equating to a 1.88% increase. The profit shows a similar tended expect when a discontinued operations is involved by resulting in a loss for 2015 of $1,636,000,000. Both 2016 and 2017 reports show a profit however 2016 is gain lower than the statement for 01/28/17 with profit dropping by $626,000,000 translating to a 22.87% less
When the decision to bid for McPhee was originally made, that company's stock had already increased from £4.90 to £5.80, its 12-month high. It is believed that speculation regarding a possible takeover contributed to this run up in the share price. Nevertheless, we made an offer of 8 shares for every 10 of their shares. Our shares at the time were £8.00. Thus, the deal was valued as follows:
Dell and Hewlett Packard (HP) are two of the most influential companies in the PC market. The CEO of HP requires an understanding of how dells strategy allows it to achieve a competitive advantage so that he/she can counteract it. This report has been carried out to provide the CEO with the necessary information to do this. Therefore the objective of the report is to provide the CEO with detailed information on Dell as a business and its strategy. In order to achieve this, first the main strategies of Dell and how they provide competitive advantage will be identified, then the business models and e-business initiatives used
As we can see on attached charts - Market was not too sure about this merger (“On paper, the deal has much to commend it, many outsiders say”. But thorny issues remain, including how to accommodate the strains between consultants and auditors, potential conflicts of interest involving important clients and even the delicate matter of choosing a new name. If the negotiators are not careful, fallout could haunt the combined firm for years to come.) From the time when merger plans were made public Shares of
per our assumptions, our equity risk premium4 is 6.5%. Our Risk Free rate (Rf) is
Compaq Computer Corporation was a company founded in 1982 that developed, sold, and supported computers and related products and services. Compaq produced some of the first IBM PC compatible computers, and were the first company to legally reverse engineer the IBM Personal Computer. They possessed a large marketplace and were a severe competitor for the technical giant Hewlett Packard. Both of these organization were at a crossroads with regards to their financial futures and they were competing against the other for market penetration of the personal computer.
Page eight of the case begins to outline some of the challenges that the HP-Cisco alliance had already faced concerning the sale of joint products. For example, we learn that at HP, Cisco products did not count towards a sales representative’s quota and this resulted in a decline in sales of Cisco equipment by HP sales representatives. Further, if HP or Cisco sales staff had to master not only their parent company product line,