Hewlett-Packard Buying Compaq for $21B

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Tech giant Hewlett-Packard Co. is buying Compaq Computer Corp. for about $21 billion in a blockbuster merger that should shake up the struggling computer industry -- and will leave as many as 15,000 people out of a job.

``It is not our intention to lose momentum in the marketplace, but in keeping with being realistic, we think it will be possible to see some revenue loss in '02 and '03,'' HP chairwoman and chief executive Carly Fiorina said in a conference call.

The deal ``vaults us into a leadership role with customers and partners — together we will shape the industry for years to come,'' Fiorina said.

HP chief financial officer Bob Wayman said he expected the revenue decline would be less than 5 percent, and that earnings will get a boost of 20 percent or more by 2003.

Both Palo Alto-based HP and Houston-based Compaq have been hurt by technology sector downturns in the past year and each company imposed layoffs to deal with shrinking profits.

A Compaq spokesman said the two firms were cutting 15,000 jobs but declined to give details.

The deal offered a premium of about 19 percent on Compaq based on Friday's stock prices, but that premium, like the price of the deal, sank with the fall in HP stock. Originally seen at some $25 billion, the value of the deal sunk to just over $21 billion by mid-day on Tuesday.

The merger creates a behemoth with 130,000 employees and $87 billion in revenue — about the size of IBM Corp. — with products not only in the personal computer business but also in computer servers, printers and high-tech services.

The company will still be called Hewlett-Packard and will keep its headquarters in Palo Alto, though it will have a substantial presence in Houston. HP's Fiorina will keep her posts at the merged company. Compaq's chairman and chief executive, Michael Capellas, will be president.