The CEO Fiorina made the correct choice to acquire Compaq. Before the acquisition, HP was struggling in global sales and market share loss from its competitors IBM and DELL. There was an economic war among HP, IBM and DELL to win the benchmark in computer industry.
Despite the business strategies among HP, IBM, Compaq and DELL, HP gained increasing revenue from year 1999 to 2000. However, from year 2000 to 2001, HP’s total net revenue annual growth rate was -10.4% and earnings (loss) from operations annual growth rate was -55.7%. The main three segments in HP, imaging and printing systems, computing systems and IT services were recorded net revenue annual growth rate with -5%, -15.8% and 6.6%, respectively; total earnings(loss) from operations with -27.6%, -146.9% and -46.1%, respectively.
Furthermore, in FY 2001, under decomposing profitability, HP’s operating ROA was 3.1% was far away from its competitors, such as IBM with 17.4% and DELL with 129.3%; as well as HP’s ROE with 2.9% compared with IBM with 37.4% and DELL with 41%. Also, the evaluating operating management performance of HP’s Gross Margin was 26.5% compared to IBM with 37% and DELL with 20.2%. We can see that the PC segment was decreasing its profit margin, the computer industry relied on printers, servers and services segments. These segments bring higher margins and higher profits to the computer companies. However, HP was losing its EBIT margin and NOPAT margin more than IBM and DELL.
Undergo the evaluating investment management. “Operating working capital turnover indicates how many dollars of sales a firm is able to generate for each dollar invested in operating working capital.” Overall DELL was performing very well. Under the turnover ratio, HP with 8.08,...
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...$2.5 billion total saving in 2003 would make the new company more cost efficiency.
According to Goldman and Sash analysis, the new combined company from CY 2001 to FY 2004, HP could contribute from 55.7% to 68.2%, Compaq could contribute from 44.3% to 31.8%. The “...exchange ratio in the merger of 0.6325 of a share of HP common stock for each share of Compaq common stock” was hard to balance the benefits between funders or investors from the two individual companies. Because there were lots of unknown issues and there was no standard benchmark to follow.
The histrionic financial report stated most people on HP board firmly believed the acquisition would bring new problems to the company. However, we can see the new company could restructure and become more price competitive and more cost effective. A new financial performance would present after the acquisition.
RadioShack’s financial stability has been a much discussed topic in the electronic retail store industry. It has only recently realized that its old formula has not translated well into the current market. Part of its plan to become an active competitive member in their industry relies on several factors within the company that can be analyzed, changed, and fixed using a financial analysis. The financial ratios will let them identify their problem areas in comparison to their industry competitors.
The first analysis will be on Verizon. The current ratio and the debt to equity ratio both improved in 2006 when compared to 2005. However, the net profit margin dropped from 9.8% to 7.0%. What does this tell us as investors...
The Lester Electronics Scenario has potential for several issues and opportunities. The first issue is that Shang-Wa has been approached with a hostile takeover bid. TEC showed its interest in acquiring Shang-Wa to expand their global growth opportunities. Shang-Wa knows that due to the size of the TEC as a company, this could turn in to a hostile takeover is they do not cooperate. As part of their defensive technique, Shang-Wa has approached Lester Electronics with the idea that a partnership would benefit both companies. Lester Electronics has done the research and found that a merger would be more beneficial to the company. This could cause some possible problems with Shang-Wa because their proposal was for a partnership, not a merger. John Lin, Shang-Wa's CEO may not be ready to give up his company just yet, even though he has been thinking of retiring soon. As part of a merge with an internationally based company, Lester Electronics will also have to do the research to find out how to best deal with operational exposures, such as exchange rate fluctuations.
The deal is a bold move by P&G Chief Executive A.G. Lafley, who has led the company out of dark times over the past four years. Moving too fast on a restructuring plan implemented by former CEO Jager, the company posted several disappointing quarters and its stock lost more than half its value in 2000. The merger, would create a company with revenues of more than $60 billion that would have even greater clout against mass-market retailers like Wal-Mart Stores Inc., which have been pressuring consumer product suppliers to keep costs low. Lafley was optimistic that the company would not be forced to divest many properties as part of an antitrust review.
The merger has had fundamentally consequences for the two companies, but also for their competitors, airports...
In our days mergers and acquisitions are a predominant feature of the international business system as companies attempt to exploit new market opportunities and to strengthen their market positions. Each year sets a new record for the total value of mergers and acquisitions and nearly every day new announcements are made in the business newspapers.
A merger is a partial or total combination of two separate business firms and forming of a new one. There are predominantly two kinds of mergers: partial and complete. Partial merger usually involves the combination of joint ventures and inter-corporate stock purchases. Complete mergers are results in blending of identities and the creation of a single succeeding firm. (Hicks, 2012, p 491). Mergers in the healthcare sector, particularly horizontal hospital mergers wherein two or more hospitals merge into a single corporation, are increasing both in frequency and importance. (Gaughan, 2002). This paper is an attempt to study the impact of the merger of two competing healthcare organization and will also attempt to propose appropriate clinical and managerial interventions.
For a few years HP tried to make strategic changes that will reposition the company on the market and give driving force to keep distance between them and competitors. Until 2011 when Meg Whitman took CEO role, HP struggled with problems such as too many employees, spiraling debt, poorly executed and expensive acquisitions and declines in every one of its lines of business. Two big acquisitions (EDS in 2008 and Autonomy in 2011) instead to have positive impact on the company, were painful when the HP had to write down combined value of 17 billion US dollars. According to Meg Whitman, HP’s CEO, company is focusing onto the major trends in the industry, IT investment—cloud computing, information optimization and data security. Gross Domestic Product is currently growing faster than HP’s revenue, however CEO expects that will change by 2016. So far company solved some problems such as repaying debt. Currently all divisions excluding finance has debt of zero. HP is in process of reducing n...
The profit margin is a ratio measures how much earnings the company is made from every dollar sales. The bigger ratio indicates that the company has a stronger ability to manage expenses to generate earnings. In 1986 and 1987, the company’s performance was at the top 25% of its peer competitors, while in 1988, this indicator dropped to 0.04 which fell in the top 75% group. The ratio shows that MiniScribe managed its revenue and costs well in the first two years, as the reason of increased market acceptance of company’s new product in 1986, the surviving of the microcomputer industry, the innovative method to produce 5 ¼ -inch and 3 ½ -inch Winchester disk drives, etc. Besides, the dramatic decline in 1988 was attributed to the fierce price
Another of her shortcoming was, going on a merger and acquisition spree rather than focusing on the innovation HP was known for. Her acquisition of Compaq, did not yield the desired results. Also, her public spat with Walter Hewlett on this, did not bore well for the company. Through the acquisition Fiorina wanted to gain increased revenue from the low margin computer business, drifting away from HP’s strategy to focus on profits rather than on revenue.
For many years, IBM succeeded in holding a very good market position. In fact, the company achieved a very high market share and huge profits. However, this situation did not last forever. In 1990, IBM experienced its first quarterly loss of $2billion due to some unexpected accounting charges. However, revenues increased from $62.7 billion in the previous year to $96 billion. In 1991, the c...
Evaluating a company’s financial condition can be done by looking at its profitability or its ability to satisfy long-term commitments. These measures can be viewed through an analysis of a company’s financial statements, including the balance sheet and income statement. This paper will look at the status of Scholastic Company’s (Scholastic) ability to satisfy its long-term commitments and at the profitability of Daktronics, Inc. (Daktronics). This paper will include various financial ratio calculations and an analysis of the notable trends. It will also discuss the profitability and long-term borrowing positions of the firms discussed.
PC manufacturers who limit their inventory to reduce the impact of price fluctuations are at a cost disadvantage by failing to reduce costs through economies of scale in purchasing components. Therefore PC manufacturers face high risk when stocking components and essentially loose out on profitability due to changes in technology.
Dell Inc. weakness was cell manufacturing because their assembled computers were being shipped five to six days after the order was placed. It is an inconvenience for the customers to always send their computer away to have it repaired. First, they are left without internet access. Second, the time it reaches Austin, Texas, have it repaired, and shipped back can take days. The company opportunities were the Dell U.K. that open business in 1987 and in that country it was a lot of companies selling cheap computers. Dell Inc. strides on loyalty among customers and employees, and that could only be derived from having the highest level of service and performing products. Segmentation within the company enables them to measure the efficiency of the business in terms of assets use. Dell Inc. evaluates their return on invested capital in each segment, compare it with other segments, and target what the performance of each should be.
Hewlett-Packard (HP) and Compaq Computers pulled off the largest technological merger in history. In September 2001, Carleton (Carly) Fiorina announced that HP will acquire Compaq’s stock transaction that will value at $25 billion (Hoopes, p. 4). The idea of the merger came up during a telephone conversation by HP’s CEO Fiorina and Compaq’s CEO Michael Capellas during June 2001, the original purpose of the telephone call was to speak about licensing agreement (Hoopes, p. 4). HP and Compaq, a Houston-based PC organization founded in 1982, decided that in July 2001 that the outline of the deal was established and after the announcement of the merger in September, the merger would be approved by the boards of both organizations (Hoopes, pp. 4-5). On the morning of November 6, 2001, Walter Hewlett, son of co-founder William Hewlett stated that he and his family would publicly oppose to the merger and later that day David Packard Jr., son of co-founder William Hewlett, also stated that he would publicly oppose to the merger. With little support for the merger, Fiorina had to justify why acquiring Compaq would eliminate a player in the PC market and that the merger for HP will create a full service technology firm that is capable from selling computers to developing complex networks (Hoopes, pp. 5-6). With the future of HP in jeopardy, Fiorina failed to sell the merger to the family members of the Hewlett or the Packard. An analysis of the HP and Compaq merger reveals a challenge for HP and how to manage cultural differences with proper internal communication. The methodology used for this paper will be the organizational resistance to change and organizational learning.