HP BUYS COMPAQ

San Jose, Calif., Sept. 3 -- Hewlett-Packard and Compaq Computers said Monday night that they were merging in a a stock deal reported at $25 billion, a deal meant to bolster two companies that have been saddled with sagging profits and massive job cuts. The Deal, which the companies confirmed shortly after The New York Times and The Wall Street Journal reported it on their Web sites, would create a computer behemoth that would rival industry leader IBM. In its most recent 12 months, Hewlett-Packard reported revenue of $47 billion, while Compaq had revenue of $40 billion. Combined revenues would be only slightly lesser than IBM's $90 billion. The deal reportedly called for one Compaq share to be exchanged for about 0.63 Hewlett-Packard shares, providing a premium of around 18 percent.

The Times said Carly Fiorina, chairman and chief executive of Palo Alto, Calif.-based Hewlett-Packard, would become the new company's chairman and CEO, while Houston-based Compaq's chairman and CEO, Michael D. Capellas, would become president. Company executives said the talks had been going on for months, leading to approval by both boards over the weekend. The combined company would be based in Hewlett-Packard's hometown of Palo Alto, Calif.

The two companies have both seen their stocks suffer considerably in recent months. Compaq's stock closed Friday at $12.35 on the New York Stock Exchange, down from more than $30 a year ago. Hewlett-Packard's stock is worth $23.21, down 66 percent from its high last summer. When announced job reductions 8,500 at Compaq and 9,000 at Hewlett-Packard are completed, employment at the companies will be about 62,800 at Compaq and 87,000 at Hewlett-Packard. Houston-based Compaq began in 1982 as a maker of personal computers, experiencing rapid growth in the following decade and a half before stumbling recently. Hewlett-Packard was founded in a garage in 1938 by the late William Hewlett and David Packard. They saw the company grow from a start-up that Hewlett said made anything to bring in a nickel to a $49 billion manufacturer of high-quality computers and scientific instruments.