HP buys Compaq - Updated

HP is to acquire Compaq in a $25bn stock swap that is being hailed as the biggest takeover in the history of the sector.

Carly Fiorina, chairman and CEO of HP, will become the CEO of the new company, which is projected to have revenues of $87.4bn, rivaling IBM.

Michael Cappellas, CEO at Compaq, will assume the role of president of the hardware and services goliath. In total, five Compaq executives are expected to join the HP board.

The rest of the management line up includes Robert Wayman, who becomes the CFO of the company, while Compaq's CFO, Jeff Clarke will move to head up the integration team with Webb McKinney, currently president of HP's business customer organisation.

Under the terms of the stock swap deal, HP shareholders will own 64 per cent and Compaq shareholders 36 per cent of the newly-formed company.

The newly expanded HP will be structured around four divisions imaging and printing, access devices, IT infrastructure including servers and storage and a $15bn service business.

The deal is a response to price cuts in the sector and the companies said it should allow them to cut costs to the tune of $2.5bn by 2004.

However, the majority of cuts are expected to come from job losses. As many as 15,000 jobs could be cut as a result of the deal.

Fiorina told Reuters: "At a particularly challenging time for the IT industry , this combination vaults us into a leadership role with customers and partners. Together, we will shape the industry for years to come."