The US$19.5 billion marriage of Hewlett-Packard Co and Compaq Computer Corp appears to have survived a corporate civil war. Now it has to overcome the simple fact that, more often than not, high-tech mega-mergers fail.
Despite their architects' high hopes and detailed plans, such mergers often create confusion over dueling cultures and product lines, leading to defections by employees and customers.
"Hardware mergers have just been disaster after disaster," said James Schrager, a professor at the University of Chicago's Graduate School of Business. "You can go way back and walk through the rubble."
There was AT&T Corp's union with NCR Corp in 1991. It lost billions before NCR was spun off in 1996. Or Silicon Graphics Inc's acquisition of Cray Research the same year. SGI is still trying to regain its lost glory.
Then there was the merger of Sperry Corp and Burroughs Corp in 1986 to form Unisys Corp, which was to have challenged IBM in the mainframe market. IBM never lost its lead.
And nobody at Compaq will forget its acquisition of Digital Equipment Corp in 1998. Promised benefits simply never appeared.
HP and Compaq will have to resolve culture clashes, mesh product lines and soothe customers amid the not-so-cheery atmosphere of the planned 15,000 layoffs at the combined company.
After shareholder approval is certified, the new HP will have to prove it's greater than the sum of its parts, and that two behemoths can innovate just as nimbly as smaller competitors and startups. Innovation is a function of employee energy and leadership.
"Buying another weak player usually hurts innovation," Schrager said. "A great deal of the top-level corporate resources are all oriented toward making the merger happen instead of keeping innovation flying."
Mergers are rarely easy in any industry. High-tech companies, however, must launch new products quickly and rely more on employees -- assets who can easily walk out the door.
"When you buy brains, the asset is highly volatile. It's got to be nurtured, cared for, suckled," said Paul Hammer, a senior vice president at Houlihan Lokey Howard and Zukin Investment Banking. "If not, it's not going to produce what you want."
Some high-tech mergers do work, but generally only when a big company swallows a smaller firm. Router maker Cisco Systems Inc and software giant Microsoft Corp have successfully acquired important technologies this way.
HP chief executive Carly Fiorina and Compaq's Michael Capellas say their companies are better prepared for the union than any in history. They have been planning integration issues since last summer, and more than 900 employees are working full time on meshing the companies and studying past merger mistakes.
"We are prepared to hit the ground running," Fiorina said. "We have already made the tough decisions."
Of course, no chief executive planning a merger has ever predicted disaster.
In 1998, for instance, Compaq acquired Digital for US$8.55 billion. The goal was to push Compaq into the league of giant IBM.
Compaq's and Digital's cultures clashed. Plans to create a consulting business never took off. Product decisions were not made quickly or changed. Confused customers took their business elsewhere.
"It literally took years for them to sort out the true integration of the two businesses," said David Yoffie, a business professor at Harvard University. "Most of Digital's business has been destroyed."