Wednesday, September 8, 2010

Worthless speculation - who else could acquire Hewlett Packard?

Now that NetworkedBlogs allows my Empoprise-BI posts to appear in Facebook almost instantaneously, I'm trying to make more use of my Empoprise-BI page on Facebook (available at the URL - if you're a Facebook user, feel free to like it and follow the discussion). One of the items that I've shared on the page was the Tom Foremski article "Could Hurd + Oracle Acquire H-P?" Foremski speculated:

HP has a market value of about $93 billion compared with about $95.3 billion in the wake of Mr. Hurd's departure. Oracle stands at $121 billion, a $5 billion increase over the same period.

Yes, it is a big pill to swallow however, it would enable Larry Ellison, CEO and co-founder of Oracle to perform an end run in the massive global IT market and also leave a substantial legacy on his upcoming retirement.

If there is one thing we know about Larry Ellison is that he is motivated by big goals. Is this one too large for him?

It's worthwhile to know that HP itself is the product of a number of different acquisitions - a fact that I know all too well. In the late 1990s, the company where I was working (Printrak) was supplying its sixth generation AFIS software on Digital Equipment Corporation computers. Printrak had just acquired a computer aided dispatch unit that supplied its software on Tandem computers. In the meantime, Printrak was starting to incorporate standard Compaq computers into its customer hardware configurations. And Printrak was a subcontractor to EDS for a major statewide system. Within a short while, Compaq had acquired DEC and Tandem, and HP had acquired Compaq and EDS.

Personally, I think that an Oracle acquisition of HP appears to be far-fetched. Any acquisition has to clear regulatory hurdles, not only in the United States, but around the world. Could an Oracle-HP merger get past the regulators in the United States, the European Union, China, and every other country in which the two companies do business?

So if Oracle would meet some resistance, is there a company who could acquire HP without meeting such resistance? Let's take a look at the top U.S. companies by market capitalization as of August 31, 2010 (courtesy The Online Investor):

Exxon Mobil XOM $302.71
Apple Inc. AAPL $222.10
Microsoft MSFT $204.40
Berkshire Hathaway BRK.A $193.72
Wal-Mart Stores WMT $188.60
Procter & Gamble PG $169.32
AT&T Inc. T $147.02
Johnson & Johnson JNJ $157.86
Int'l Business Mach. IBM $156.08
General Electric GE $155.61
JPMorgan Chase JPM $144.37
Google Inc. GOOG $143.70
Pfizer PFE $129.30
Coca-Cola KO $121.62
Bank of America BAC $124.92
Wells Fargo WFC $123.46
Cisco Systems CSCO $115.72
Oracle ORCL $120.18

First off, the company acquiring HP would have to have a complementary line of products. Oracle and Sun were complementary; Johnson & Johnson and HP are not. So that rules out the oil, banking, and consumer companies (although a Wal-Mart/HP combination would certainly be intriguing).

I don't know enough about Warren Buffett to know if he'd consider a run at HP.

So who does that leave? Apple, Microsoft, AT&T, IBM, GE (possibly), Google, and Cisco.

Of those companies, the two potential acquirers that seem most intriguing to me are IBM and AT&T. For the same reasons that Oracle would want to acquire HP, IBM would want to ensure that Oracle would NOT acquire HP. However, an IBM-HP combination would face more regulatory hurdles than an Oracle-HP combination.

But what about AT&T-HP? This would give AT&T another market, would provide devices that could be used over AT&T's network, and would counter AT&T's dependence on Apple (or is it Apple's dependence on AT&T?).

Now some would claim that AT&T would never be so bold, but remember that this is not your father's AT&T. Still, who knows how likely such a move would be.

But it's good for worthless speculation, and we're certain to see a lot of worthless speculation over the next few weeks.
blog comments powered by Disqus