15 January 2002 Hardware vendor Hewlett-Packard (HP) has claimed in its latest filing that its merger with rival Compaq will save it $2.5 billion (€2.8bn) a year. It has also promised to pay more than $575 million (€645m) in bonuses to HP and Compaq employees if they remain with the merged company for a year.
“The merger represents the single best strategic alternative for our respective companies and is the strategy most likely to deliver increased value to our respective shareholders,” HP claims in its filing with the Securities and Exchange Commission (SEC).
The company says $625 million (€700m) of the $2.5 billion (€2.8bn) savings will come from eliminating duplicated administration and technology and $600 million (€673m) in lower costs for components.
However, it acknowledges that revenue could fall by as much as 5% per year ($4.1 billion or €4.6bn) as the companies merge divisions and product lines. Perhaps ominously, some analysts believe the drop in revenue could be double HP’s forecast.
In separate filings, Walter Hewlett, son of HP’s co-founder William Hewlett and a director of the company, said that HP could lose more revenue and profit because of the merger and doubted whether the company could achieve the projected savings.