Hewlett-Packard's FAQ On the Mergers

Why does this make strategic sense for HP and Compaq?

This merger creates an $87 billion global technology leader with the product breadth, market reach and cost structure to shape the industry for years to come. It is expected to drive a significantly improved cost structure across the combined enterprise, which would have a leadership position with customers and partners. The merger better positions the new company for growth when market conditions improve. Financially, the merger is compelling for shareowners of both companies.

Why are the two companies pursuing this merger now when both are in the process of transforming themselves?

We have a shared vision of the future of this rapidly changing industry, and we believe we have a unique window to combine our assets and drive the transformation from a position of leadership. There are no guarantees this opportunity would have been available in the future if we didn't seize it now and form this value-creating combination for customers, shareowners and employees, both short- and long-term.

Who approached whom?

The CEOs of both firms have been talking for 18 months on a variety of ways the companies might work together. In June, HP approached Compaq about the licensing of HP-UX. Once both companies realized they shared a common vision, a common strategy, and had complementary product sets, it turned into a deeper conversation fairly quickly. Both boards of directors reviewed the strategic rationale in July. Bankers were engaged subsequently, and in-depth negotiations took place over the last six weeks.

Why do you believe you'll be successful in combining these two companies?

The companies have a shared vision. The integration of the two companies is being carefully planned and will be carefully and diligently executed. There are two compatible CEOs committed to its success.

What does this mean for HP's reinvention program and its HP Way values system?

Our unique culture is clearly an important aspect of this merger and will contribute to its success. In fact, this combination should accelerate us on the path we're already on. It fills in some key strategic gaps. We think this combination will generate a lot of excitement, particularly for our sales force.

How do you plan to manage these companies prior to closing?

Each company will continue to be run as an independent business and compete vigorously. For HP that includes staying focused on our strategy, serving our customers, and continuing to manage expenses aggressively.

vWhat does this merger mean for your direct and indirect distribution models?

The combination gives us a significant presence in both direct and indirect channels. This merger improves our ability to sell to customers any way they want to buy. Compaq has made good progress in transitioning their model to a more direct approach, and HP was already moving in the same direction - this combination will accelerate the process. We also remain firmly committed to the channel. The key is to serve both sets of customers, and let customers buy the way they prefer.

Do you expect any antitrust issues?

The two companies are largely complementary. With the synergies and customer benefits of the transaction, we don't anticipate any antitrust issues that would prevent us from closing the transaction.

How many job reductions do you expect from this merger, and when?

We estimate headcount reductions of approximately 15,000, or about 10 percent of the combined workforce. This will be achieved through targeted job reductions and attrition, phased in over 24 months after closing.