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CNN Live At Daybreak

Can HP/Compaq Merger Rescue Companies From Lagging Economy

Aired September 04, 2001 - 07:35   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
VINCE CELLINI, CNN ANCHOR: There is a mega computer merger to tell you about this morning. Hewlett-Packard is buying Compaq in a $25 billion stock deal. This marriage comes as the computer industry suffers through an economic downturn. But could this deal rescue the two companies from sagging profits and massive job cuts?

CNN's Bruce Francis joins us from New York to talk about that. Bruce, first of all, those people that may be caught up in this merger, will there be job cuts?

BRUCE FRANCIS, CNN CORRESPONDENT: There will be big job cuts, Vince, 15,000 of them at least. Those figures are probably conservative. That's about 10 percent of the workforce and let's not forget that both companies have already announced substantial job cuts, 8,500 at Compaq, 9,000 at Hewlett-Packard. Those are already going on right now. So you can see another big let down for job cuts. And since it is Hewlett-Packard that's acquiring Compaq here, you could expect that a lot of those jobs would be felt from the Houston- based company, Compaq.

CELLINI: Well, how will this merger affect stocks, Bruce?

FRANCIS: Oh, right now we're seeing what we fairly typically see in such merger activity. The acquiring company, Hewlett-Packard, is trading lower this morning, down about $1.40. Compaq, which is being acquired, is trading up a little bit more than a $1 right now. The deal as presented by Hewlett-Packard represents about an 18 percent premium to where Compaq was trading on Friday, Vince.

CELLINI: Well, usually we can get a whiff of something in the air, a deal possibly in the works. But procedurally, was this merger a surprise on Wall Street?

FRANCIS: Yes, you hit it right on the head there. This is very unusual. These are huge, huge companies with lots of employees, lots of investment bankers working for them. We really didn't get wind of this story till it started to go down late last night. I'm told by sources close to the deal that talks had been going on for months between the two CEOs. So it's rather surprising we didn't hear anything about it, really, until late last night/early this morning.

CELLINI: Well, if they got it past you, Bruce, then they were doing a good job of being tight-lipped about it.

Bruce Francis, thank you very much.

FRANCIS: My pleasure.

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