Other companies, particularly Compaq and Gateway 2000 have tried to emulate its direct sales method but have not managed quite well to make a dent on Dell’s competitive advantage. Before its merger with HP, Compaq had acquired Digital Equipment Co. for $9.6 billion. Its merger with HP was calculated to produce cost economies by eliminating inefficiencies and reaping important economies of scale by combining operations of the companies involved, particularly where they are complementary.Under oligopoly, collusion whether explicit or implicit is prohibited by law. Healthy competition among the players redounds to the advantage of buyers and consumers as they reap the benefits of both quality and low prices. Any attempt by one player to reduce the price below prevailing price of a certain product category, assuming the absence of quality differences or product differentiation, would cause the others to match the decrease, thereby benefiting consumers but to the disadvantage of the sellers, Raising the price would also mean that the initiating player would lose sales because the other players would not follow suit and would receive purchase orders from customers who change their preference in favor the companies maintaining the prevailing price.Pre-merger Hewlett-Packard Company was a leading global provider of computing and imaging solutions and services with total revenue of $45.2 billion in its 2001 fiscal year. In September 2001, Hewlett Packard and Compaq concluded a horizontal merger agreement that would create a global technology leader, providing a complete set of IT products and services for both businesses and consumers, worth $87 billion in revenues. It was intended to compete with and perhaps edge out competitors Dell and IBM. The new HP (with a new NYSE stock symbol HPQ) would become the foremost global player in servers, imaging, and printing, and would belong to the top 3 in IT services, storage, and management software.
Merging Movements of the Hewlett Packard and Compaq Computers