By the late 1990s the leaders of the HP were concerned at a slowing rate of growth and an inability to take advantage of the internet revolution. Its order business were growing slowly. An internal review by the CEO Lewis Platt decided that the company was too big and too diversified: it lacked a clear corporate focus. The non-computer areas were to be spun off.
             Compaq found itself in an even worse plight that HP in the late 1990s as it rapidly began to lose market share and make losses. Although it achieved No.1 in overall PC sales in the mid-90s, an attempt to compete with Dell through direct sales fell foul of its distributors. Compaq wished to extent into the area of services and to achieve this bought the Digital Equipment Corporation for the large sum of US$8.4 billion in 1998. It had great difficulty absorbing the company and began to lose customers in the service area. It too had lost focus.
             In the case of HP/Compaq, the main motive for the merger is to establish a company with the size to be a dominant market player, one capable of competing on equal terms with Dell. The other motive is to cut costs through various synergies in order to push up the level of profit margins.
             The process of acquisition and merger absorbs resources. Due diligence exercises, which are critical to a successful outcome, take time and money. It is said that staff from HP and Compaq devoted more than one million hours of their time to planning this merger, before it occurred or was even approved. This is a prodigious investment and like any investment needs justification. In the short run the process may actually push up costs before any savings are realized The expenditure of time is not surprising. It is a major problem to fuse two large organizations which operate throughout the world and which may have entirely different culture, structures and strategic philosophies. The same process has to be repeated in each country in which they operate,...