Reports: Hewlett-Packard Buys Compaq Computer for Estimated $25B in Stock

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Hewlett-Packard is buying fellow computer maker Compaq Computer for an estimated $25 billion in stock, a deal meant to bolster two companies that have been saddled with sagging profits and massive job cuts, according to reports.

The deal would create a computer behemoth that would rival industry leader IBM. In its most recent 12 months, Hewlett-Packard reported revenues of $47 billion, while Compaq had revenues of $40 billion. That is only slightly lesser than IBM's $90 billion.

The New York Times and Wall Street Journal both reported the deal on their Web sites late Monday, citing people close to the negotiations. Spokesmen for both companies declined to comment to the newspapers.

The reported deal comes as the computer industry suffers through a downturn that has seen sales shrink considerably. Hewlett and Compaq have both seen their stocks suffer drastically in recent months.

Compaq's stock closed at $12.35 on the New York Stock Exchange on Friday, down 76 percent from its peak in early 1999. Hewlett-Packard's stock is worth $23.21, down 66 percent from its high last summer.

When announced job reductions, of 8,500 jobs at Compaq and 9,000 at Hewlett-Packard, are completed, employment at the companies will be about 62,800 at Compaq and 87,000 at Hewlett-Packard.