Yet, H-P will be increasingly dependent on selling PCs, which now account for 21 percent of total sales and will rise to 33 percent when the acquisition closes. That disturbs many investors, who say PCs will hold back earnings growth at the combined company.
In the week after the acquisition announcement, Compaq's stock fell 16 percent, while H-P's shed 23 percent.
Compaq said the pending acquisition hurt sales because potential customers weren't sure which products would be available after the transaction.
"They essentially stop buying if they don't believe a product will continue to be supported," said Steven Salopek, a money manager at Banc One Investment Advisors.
Robert Torray, chairman of a money-management firm bearing his name, bought Compaq's shares after the announcement because the company has more than US$1 billion in cash after debt is taken out. The firm owned 4.72 million shares in June, according to a regulatory filing, "I don't see this company failing, and given the size of the sales, if you cut back the overhead, it might be interesting," said Torray.
Investors have praised the way Capellas has cut costs, and they are listening to his message, even if the acquisition isn't as smooth as the CEO's mambo skills.
"For the first time, he got across the impression that this deal was thought out extensively," Salopek said.
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