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HP and Compaq: $25 Billion for a Computer Services Group?

Dave Aiello wrote, "I noticed that many Wall Street analysts agree with me on the proposed HP-Compaq merger. The New York Times says that the merger '{is viewed} as an admission of weakness rather than strength and as an indication that a shakeout has begun in the brutally competitive computer business.' I think that the most valuable acquisition HP is making is the service business that Compaq acquired when it took over Digital Equipment Corporation. Is this business worth the amount of stock that HP is giving away?"

"The greatest cost, of course, is the opportunity cost of focusing the combined organization inward to rationalize its overlapping businesses. Can anyone in the hardware industry afford to take its eye off the ball for a year at this point?"

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