| Sumario: | The first of six special articles on big mergers of the recent past. Compaq's takeover of Digital Equipment was the biggest merger in the history of the computer industry, but it proved to be ill-fated. In 1998, Compaq Computers, the world's largest PC maker, had been growing by 30 percent a year. Two-and-a-half-years later, it is a shaken company with an uncertain future, having lost over $2 billion since its takeover of Digital Equipment. From a distance, it appears that Compaq choked on Digital, but another possibility is that Compaq was already living on borrowed time before the Digital deal had a chance to work out. Compaq was already lagging in 1998—its manufacturing and distributing system had passed its peak, prices were falling, and difficulties in forecasting were increasing. The move to buy out Digital was an attempt to get into a more profitable market: services and sophisticated, high-end hardware. The problem for Compaq was not so much the strategy as the timing of it; if they had merged a few years earlier, the future may have been far brighter.
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