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Monday, 13 November, 2000, 22:09 GMT
Hewlett-Packard drops PwC bid
Mr Packard and Mr Hewlett
David Packard and Bill Hewlett outside the garage in Palo Alto, California, where they set up Hewlett-Packard
Hewlett-Packard has dropped its plan to buy the consulting arm of professional services giant PricewaterhouseCoopers.

"We are disappointed that we have not been able to reach a mutually acceptable agreement to acquire PwC's consulting business," said chairman and chief executive Carly Fiorina.

She said that the logic of a link up remained, but that the attraction of a deal at present had fallen because of "the current market environment".

Ms Fiorina said HP was still committed to expanding the group's consulting capabilities, possibly by acquisition.

The talks between the two sides were made public in September, with a price of $17bn to $18bn (11.9bn to 12.6bn) in cash and stock discussed at that time.

Printer maker

The purchase was said to have been part of HP's strategy of "strengthening its professional services capabilities to provide customers with comprehensive technology solutions as they transform their businesses".

It would have provided an opportunity to break free of the "printer maker" tag and tap into the lucrative business solutions market.

PwC has decided to sell off its consulting arm as a result of pressure from the American Securities and Exchange Commission on all the Big Five professional services firms to split their audit and consulting operations.

The SEC has concerns over the independence of audits carried out by firms who are doing consultancy work for the same clients.

Any deal would have needed the approval of PwC's 10,000 partners worldwide and the SEC.

A spokesman for the firm said it would now carry on with its plan to split itself into two, and was considering either a sale or large-scale investment from another firm, or a spin-off on the stock market.

Pre-opening fall

The ending of talks was announced as HP unveiled much worse than expected results in New York.

Its shares fell 15% before the markets opened, scuppering hopes of a revival for tech stocks after a torrid week prompted by a revenue warning from personal computer maker Dell.

The news of its earnings shortfall surprised Wall Street, which did not expect the company to report its fourth-quarter results until after the close of the market on Monday.

Hewlett-Packard reported underlying fourth-quarter earnings per share of 41 cents - analysts had been expecting 51 cents per share.

For the fourth quarter, net revenue reached $13.3bn, compared with $11.4bn in last year's fourth quarter.

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See also:

17 May 99 | The Company File
Hewlett-Packard sales soar
02 Mar 99 | The Company File
Hewlett-Packard splits in two
03 May 99 | The Economy
E-business is booming
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