Cquay Technologies Corp Mergers and

CQUAY Technologies Corp Mergers and acquisitions have become a very popular tool for the companies to gain more market share and improve competitive advantages in the ever changing global market place. Though according to research in 1999, about 75-83% of all the mergers were not as productive to both the merging companies as they expected, the total volumes of mergers until 2002 has reached the order of $291.7 billions.

Hewlett Packard announced its' merger with Compaq in 2001-2002 and as of today it is the best example to analyze whether the reasons for this merger expected to result in total revenues of $87 billion realized. Initially, before the merger Compaq was in the maturity stage of the company life cycle enjoying large market share in manufacturing and selling desktop and portable personal computers, carrying out services to these products, also manufacturing and selling pocket computers, and providing online storage in which the company has the biggest market share.

HP was known as a "box vendor" selling a big variety of related products and specializing in its' printers and cartridges, while also enjoying strong market position in high-end UNIX servers. Below is the graph of the pre-merger product mix for the HP and Compaq companies. The aim was to carry out horizontal merger in order to exploit economies of scale in production by sharing the same resources and thus decreasing costs per unit, with expansion of the geographical market shares, and using the "synergy" effect.

The HP company was aiming also to increase its' position in relation to its' major competitors Dell and IBM, and to improve the position in this "shrinking market." For Compaq, the merger was also the only right decisions to remain profitable in the tightening market and the two companies were able to exploit their both competitive advantages: for HP this was printers and cartridges, for Compaq this was the PCs and storage plus services facilities.

Thus, the company did not manage to the fullest extent to capitalize on achieved competitive advantages and did not manage to cover all the risks Before the merger, the HP managers expected their market growth rate between the years of 2002 to 2004 to annual increase by 12%, for the PCs business segment to grow by 8% annually, for services segment by 12% and to increase imaging and printing segment by 10% annually. The company projected the highest profit margin growth in the servicing sector as this was Compaq competitive advantage before the merger.

After 3 years of the merger, the actual earned revenues were not equal to the predicted ones in any sector: the enterprise revenues fell by 20% in 2002 compared with their 2001 rates, and by 5% from 2003 to 2002; the same happened with PCs segment, while services segment also decreased considerably by 11% in revenues in the first fiscal year after the acquisition.