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.
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
In the year of 2005, the companies eventually found a way to make it easier for the companies to combine without having any major issues or problems. Unfortunately, around the year of 20010 the merging com...
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.
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.
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.
1. How and why did the personal computer industry come to have such low average profitability?
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...
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.
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...
Companies merge and acquire other companies for a lot of strategic reasons with different degree of success. The success of a merger is measured by whether the value of the acquiring firm is enhanced by it. The impact of mergers and acquisitions on organization can be small and big in other cases.
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.
Mergers and acquisitions immediately impact organizations with changes in ownership, in ideology, and eventually, in practice. There are multiple reasons, motives, economic forces and institutional factors that can, taken together or in isolation, influence corporate decisions to engage in mergers or acquisitions. The financial risks of merging with or acquiring an organization in another country and how those risks can be mitigated are important issues for corporations to conduct research on. This paper will examine the sensible and dubious reasons for mergers and acquisitions and the benefits and costs of the cash and stock transactions.
After the inspection of Barnes & Noble investing and financing activities for 2014 as identified in the cash flows statement one of the two largest investing activities would be the purchases of property and equipment. Regrettably this is a deteriorating value. (Statement of Cash Flow page 35) The second largest investment activity would be the net decrease in other noncurrent assets. This figure indicates an improvement from previous years evaluated. (Statement of Cash Flow page 35) Further investigation into the two largest financing activities; indicate that proceeds from credit facility would be the largest activity of the two financing activities. With net proceeds from Microsoft Commercial Agreement financing arrangement indicating a steady increase over the past few years. Indications are an increase in inventory, signals that company has spent more money to purchase raw materials. A change in equipment, assets or investments relate to cash from investing. Thus, a conflict with the investing strategy appears to be employed with this investment causing a deteriorating performance. As for the net proceeds from Microsoft Commercial Agreement the inflation from the previous year doubled. This is definitely a sound financial strategy for Barnes & Noble to be employing. According to the 2014 Annual Report, cash flows provided by operating activities
In the 21st century, it is more likely that most of globalised companies will be a service industry rather than a manufacturing stated Bian (2005). The new economic pattern is service pattern and it is a competitive advantage for service industry. Therefore, Lenovo’s service department should take Dell and HP as a role model; Lenovo ought to offer more detail information on selling personal computers...
From 1980 to 1996, Apple’s competitive range in the PC industry was rocky. Although Apples products were unique and well built, they were overpriced compared to competing products from IBM and others. As competitor prices dropped, Apple prices stayed the same and the company saw a decline in sales as customers opted to purchase from its competitors. John Sculley, former CEO of Apple, took many steps to improve the company’s competitive advantage. One of those steps was to compete with price by producing a low-cost computers that appealed to a mass-market. The second step was to form an alliance with rivals IBM and Novel in order to create new operating systems and applications...