Giant acquisitions: the Largest merger of it companies

The value of transactions translated at the exchange rate in 2015. This deal was met with great skepticism from experts and investors. Many, including the founding families, called the Compaq purchase of an expensive mistake and tried to prevent its completion.

Carly Fiorina, at that time the Director of Hewlett-Packard, have long defended their opinions about the merger. It is believed that the deal with Compaq will allow HP to become the largest PC maker in the world and reduce the cost of production by getting rid of many problems. At that time, PC-direction of both companies already had a fever. But successful business manufacturing printers allow HP to hold positions after the merger.

HP and now occupies a large market share, however, the expansion of the company led to negative consequences. Since 2001, the market for personal computers has changed a lot. In the past, one of the best it companies, HP gradually lowers the speed and danger of being a relic. Clumsiness, internal conflicts and the reduction of studies and dismissal of experts open the way to competitors.

To remedy the situation the company decided to change from the inside out. HP made a bet on software and enterprise services. In 2008, Hewlett-Packard swallowed Texas EDS (Electronic Data Systems). EDS was one of the largest international companies in providing services and supply of equipment for the corporate sector.

Dear before the merger with HP, surrendered their positions – many of the staff were cut to save money, others left because of disagreement with policy of the management of HP. The valuation of EDS was much too high, after 4 years and this is acknowledged at Hewlett-Packard. Concentration on short-term relationships with clients, striving to make a quick profit, lack of understanding of all processes within the company and a wrong choice of priorities – these were the main issues of the integration of EDS and HP Enterprise Services, according to experts.

The company Autonomy, engaged in big data Analytics and software development, by 2010 became one of the most successful it companies in the UK. At this time, HP executives were looking for ways to improve business. A promising direction in the analysis and data management. To reinforce this direction, the company acquired 87% of Autonomy shares.

As in the case of Compaq, many were unhappy with the merger. Later it became clear that products to license Autonomy is not so easy and profitable, and the company was heavily overvalued at the time of transaction. Of inflating financial figures accused the previous leaders Autonomy. But co-founder and former CEO of the British company stated in reply that it happened because of the differences in European and American accounting systems.

HP wrote off $8.8 bn of Autonomys assets. In 2015, the team of HP and former Autonomy executives filed counterclaims in the court and claim compensation for damages. In addition, HP has sued the shareholders affected by the transaction – the company will pay them $100 million. Since the purchase of the British firms HP reduced 27 thousand employees, and in November 2015 there will be a final separation of the company at Hewlett Packard Enterprise and HP Inc.

The first division will develop software and services for corporate business, and the second will continue to manufacture personal computers and printers. In 2003, PeopleSoft took the second place in the market of enterprise management systems after SAP. The company completed the merger with JD Edwards, enabling them to deal only with corporations but also with medium to largest organizations.

Third place in the market of ERP-systems at Oracle, who planned to change his position. It took a year and a half and $12.6 billion on modern course. Since July 2003 Oracle PeopleSoft attacked proposals for the absorption of, first, raising the price relative to the market, and then reducing the size of the proposal. The Board of Directors of PeopleSoft defended the independence of the company, marveling at the aggressive pressure from Oracle.

Joined the case to the U.S. Department of justice and the European Commission, who considered the potential transaction illegal. But Oracle led by Larry Ellison have been able to win in September 2004 in the United States recognized that violations of antitrust laws in the operation no. Later the same decision was taken in Europe. By 2005, Oracle completed the acquisition, dismissing more than half of PeopleSoft staff.

Many customers of PeopleSoft feared that her purchase was made just for the sake of elimination, and the majority of developments on former rival Oracle will roll. However, after the merger, Oracle has continued to develop and produce systems PeopleSoft and JD Edwards by making them part of their application package. A year after the transaction, the profit of the Corporation increased, Oracle approached its main rival – SAP. In spring 2009, Sun Microsystems announced an agreement to become part of Oracle.

As in the case of PeopleSoft, the authorities in the USA and Europe was greatly troubled by this deal. After approval by the shareholders of Sun it was another six months before the merger was approved by the state structures. Sun announced a possible reduction of workplaces and decrease in profit by 25 percent due to suspended state and uncertainty in the eyes of customers. In January 2010, Oracle has confirmed the completion of the Sun takeover.

According to Wikileaks, the approval of the transaction by the European Commission has contributed to pressure from the United States. Almost all the leaders of Sun left just after its absorption. Also left the company important to the developers, including the creators of Java, XML, Hudson and DTrace. Oracle stopped the development of OpenSolaris and made the system closed, a new version called Solaris Express.

One of the major problems of absorption of Sun the European Commission and many developers Oracle acquisition of MySQL is widely used. The company has agreed to grant two licenses for the database management system – a GPL and commercial version. In addition, the company closed the project and fired all the developers of his team. But the project has received development in free fork of LibreOffice.

The acquisition of Sun allowed Oracle to become not only a software giant and control the use of Java, but also a manufacturer of server systems based on SPARC servers, Sun has developed jointly with Fujitsu. Now Oracle provides technical support, provided that the hardware meet all the requirements. The company is no longer dependent on IBM, HP or EMC.

In the summer of 2011 Google announced the acquisition of Motorola Mobility, gaining more than 20 thousand patents for various mobile development along with research laboratory. Further, Google introduced the smartphone Motorola X and Motorola G running on purified from the majority of third-party modifications to the Android version. Such a move has attracted the attention and alarmed many smartphone manufacturers, especially Samsung. Korean giant felt that even his power is not enough to overtake Google in direct competition.

Version of Googles Android users were perceived better than an overloaded version of the design from Samsung. Therefore, the Korean company had to postpone the plans on the use of its Tizen OS. In early 2014 Google and Samsung signed a ten-year agreement, which contains restrictions on possible changes in Android to produce smartphones.

Google was able to hold the largest manufacturer of devices on its OS from confrontation, while having more control over the product. In the end, after the sale of Motorola to Lenovo at a much lower price Google kept all the patents and research capacity, increasing the impact on manufacturers of Android devices. Microsoft absorbed Skype in 2011, ahead of Google, Cisco and Facebook with their offer.

Experts reacted skeptically to the deal, noting that Microsoft clearly overpaid for a company that could not reach the profitability. In addition, the previous largest absorption was for an it giant failure. Despite the fact that strongly significant effect of this merger is still not brought in, Microsoft was able to extract some benefit.

The acquisition of Skype has allowed Microsoft to gain a foothold in the field of IP telephony and video conferencing, receiving of paid subscribers among the huge user base. The company has been able to integrate Skype with their products — Windows, Office, Xbox, Bing, Microsoft Messenger and Lync. So Microsoft has impacted their services simultaneously to users, and corporate clients. Serious profit Skype still does not work, but serves as a link to other projects of the Corporation, and, with the right approach, you cant keep competitors due to the greater popularity.

Compared to the price Facebook paid for WhatsApp, the profitability of the messenger is very small. But, as reported by Bloomberg, at the moment, WhatsApp only important for continuous growth. To experiment with the methods of monetization they will start after reaching a billion users. The company believes that Facebook Messenger and WhatsApp are not competing with each other due to different directions of use.

Many experts praised the deal, arguing its best for Facebook. While there is no certainty that such an expensive acquisition will bring a commensurate profit, but in the long run it is quite possible. This week, Dell and EMC officially announced the impending merger, which will be the largest in the history of the it industry.

Experts believe that there are so many reasons why things can go not as planned. Example HP confirms it. But executives are confident that together they have already shared the organization will be able to survive in a rapidly changing market and remain competitive. Analysts note that the status of a private company will help Dell in this situation.

Such major transformations are much more difficult to hold public organizations. They release products that were popular 15 years ago, but now the demand is barely growing. Dell and EMC are unable to find anything new to their products or to merge, to compensate for this problem.

Peter Cohen, Peter S. Cohan & Associates. Absorption EMC should strengthen the position Dell in the areas of data processing and storage, networking equipment and server systems. This is especially true now, when they have to compete with Amazon, Microsoft and Google.


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