Two of the globe's major forces in computing, Hewlett-Packard and Compaq Computer are to merge by mutual consent, it was announced last night.

Blessed by the boards of both companies, the $25 billion all-stock deal is essentially a takeover by HP, with its shareholders owning 64% of the combined company.

The new titan will challenge the hitherto seemingly unassailable global market supremacy of IBM which last year posted revenues of marginally over $88bn. Together HP/Compaq account for annual revenues of around $87bn with pro forma assets of $56bn-plus.

HP's Carly Fiorina remains chairman and chief executive of the combined operation with Compaq chairman and chief executive Michael Capellas becoming president of HP. He and four other Compaq directors are to join HP’s board.

According to Fiorina: “This is a decisive move that accelerates our strategy and positions us to win.” The two companies had complementary product families, which when combined would bring about “significant cost structure improvements and access to new growth opportunities. At a particularly challenging time for the IT industry, this combination vaults us into a leadership role.”

The new HP will be structured around four operating units that build on the companies' similar go-to-market and product development structures to provide clear customer and competitive focus.

* A $20 billion Imaging and Printing franchise to be led by Vyomesh Joshi, currently president, Imaging and Printing Systems, of HP.

* A $29 billion Access Devices business headed by Duane Zitzner, currently president, Computing Systems, of HP.

* A $23 billion IT Infrastructure business, encompassing servers, storage and software, with Peter Blackmore, currently Compaq's executive vice president Sales and Services, at the helm.

* A $15 billion Services business with approximately 65,000 employees in consulting, support and outsourcing to be led by Ann Livermore, currently president, HP Services.

The deal is the largest yet in the computer industry.

News source: Financial Times