HP/Compaq

1. (40 points) What was the primary motivation for this acquisition both for HP and for Compaq? If HP did not attempt to pursue an acquisition strategy what would they have to rely on for growth? What do the actions of management suggest about the potential for internal growth?

2. (20 points) Walter Hewlett believed that the acquisition would distract HP from focusing on the printing and imaging business. Why was this concern important? What does an increase in focus in the PC market mean for competitive pressure and margins?

3. (20 points) Although HP has a broader product line then Compaq this really represents a horizontal acquisition. What would be an example of a vertical acquisition for HP?

4. (20 points) Give an example of the top three external opportunities and threats for HP at the time of the Compaq acquisition. How did the acquisition help address these elements?