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HP Gobbles Compaq in $25B Stock Swap to Rival Sun, IBM

NEW YORK, Sept. 4 - Computer giant Hewlett-Packard plans to acquire rival Compaq in a $25 billion deal that will likely bear a more agile competitor to Sun Microsystems and IBM, representatives from Compaq confirmed on Tuesday.

The new company, which will retain the Hewlett-Packard name and Palo Alto, Calif., headquarters, will be home to roughly 145,000 employees and generate some $87 billion in annual revenue.

The boards of both firms have given their blessings to the deal, leaving only formal approvals from shareholders and from the Securities and Exchange Commission as well as European antitrust regulators. It was not known whether the regulatory groups would seek either company to divest any of their holdings, but analysts believe the size of the new company may encourage antitrust regulators to take a closer look.

It was not immediately clear whether the merged company would institute layoffs, but media reports today cited executives as saying that cuts were likely as the new firm looks to trim $2.5 billion in costs over several years.

Houston, Texas-based Compaq, which currently is the second-largest computer firm in the world and a premiere player in the genomics industry, had previously announced plans to cut 6,000 jobs. Hewlett-Packard, which is ranked fourth in the world in personal computer sales, also said it would lay off 8,500 workers.

It was too early to discern what effect the acquisition would have on employees of Compaq’s life science division. “We have no idea at the moment. This is so new that I don’t think the details have yet been worked out at that level,” said Lionel Binns, Compaq’s world life and materials group manager. “As far as I’m aware, everything is at the highest level at the moment.”

Representatives from Hewlett-Packard would not comment on the deal at this time.

Hewlett-Packards’ current chairwoman and president, Carleton S. Fiorina, will become CEO of the new company, while Michael Capellas, Compaq’s current president and CEO, will become president of the merged company.

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