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A SPECIAL ANNEX NEWSFLASH
Hewlett-Packard to Buy Compaq... Now What?
Two Losers Don't Make a Winner
A $25 Billion-Deal Only Adds to HP's Already Big Challenges
PHOENIX,
Sep. 4 - "Two wrongs don't make a right," goes an old saw.
"Two losers don't make a winner," would be an analogous headline
describing today's $25 billion-Hewlett-Packard acquisition of Compaq.
If in doubt (re. the "two losers" term), just
check the HP and Compaq stock charts. Both look like downhill ski slopes.
HP stock dropped from $60-something to $20-something in the last 12
months. Compaq's shares plummeted from about $33 to $12 in the same time
frame. And that's before the "ski jump" that we can expect after
today. The two computer companies' performance make even the IBM
stock look like a relative winner, even though the Big Blue has basically
treaded water for most of the last 12 months. Which is why some of the
reporters' questions we fielded this morning - comparing the new $87
billion-HP to IBM, were off the mark. IBM stock has been in the doldrums because the company is
carrying too much of its old hardware baggage around the waste. And here
was HP now adding some new hardware baggage to its waistline. And that's
a "winning strategy?" The folks at Armonk must be laughing for
joy. Nor should one expect any respite for HP and Compaq after
today's announcement. We do not see any uphill slopes for the HP stock in
the near future. The only question in our minds is if today's deal may
mark the end of a solid ground downhill slope, and the beginning of a ski
jump? (i.e., meaning a free fall?). Time will tell... Happy bargain
hunting! Bob Djurdjevic
P.S. Today's closing numbers may well mark the start of a "ski jump" for HP and Compaq. HP's shares plunged by 19%, while Compaq's plummeted by 10%, despite a surging stockmarket for most of the day.
UPDATE, Sep. 5, 2001: For two follow-up media stories on this IT industry "megadeal," check out the Wall Street Journal, "HP's Fiorina Takes on a Hefty Job" , and the New York Times, "Wall St. Finds Fault With Computer Merger" - both Sep. 5, 2001 stories.
