In a deal that will most definitely change the competitive landscape in the information technology sector, two global technology majors have agreed to combine forces to create an IT behemoth that is likely to have combined revenues of $87 billion.

The two companies involved in this momentous decision are Hewlett Packard (HP), a leading global provider of computing and imaging solutions and services, and Compaq Computer, a leading global provider of enterprise technology and solutions. While HP is focused on making technology and its benefits to all, Compaq is involved in designing, developing, manufacturing and marketing hardware, software and solutions and services.

The deal, estimated to be around $25 billion in an all-stock deal, is a shot in the arm for both companies, which have recently seen revenue slide and profit plunge because of a industry slowdown. Both companies have announced large job cuts in the recent past.

The combined entity, which will retain the Hewlett Packard name, will see Compaq merge its operations into HP. The merged entity will be headquartered in Palo Alto, where HP is headquartered, and retain a significant presence in Houston, the home of Compaq. Houston will be a key strategic center of engineering excellence and product development. The existing HP shareowners will own approximately 64 per cent and Compaq shareowners 36 per cent of the merged company. The deal, which is expected to be completed by the first half of next year, could raise antitrust concerns.

It is expected that the new HP will offer the industry''s most complete set of IT products and services for both businesses and consumers, with a commitment to serving customers with open systems and architectures. Further, senior officials of both companies believe that the combined company will have number one worldwide revenue positions in servers, access devices (PCs and hand-helds) and imaging and printing, as well as leading revenue positions in IT services, storage and management software segments.

Carleton Fiorina, chairman and chief executive officer of HP, will be chairman and chief executive of the new HP. Michael Capellas, chairman and chief executive officer of Compaq, will be the president of the new company. Four other board members from Compaq will join Mr. Capellas in the new HP.

Commenting on the development, Mr. Capellas said that in sharp contrast to the companys competitors, the new HP is committed to leading the industry to open, market-unifying architectures and interoperability. This, he believes, will reduce complexity and cost for customers and will significantly change the basis of competition in the industry.

It is the last that the industry is closely watching. The new HP will pose a serious challenge to IBM, the worlds largest computer company and also other players like Sun Microsystems, in the server segment and Dell Computer in the personal computer segment.

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. Leadership and estimated revenues (calculated by combining the two companies'' trailing four reported fiscal quarters) are as follows:

• 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 to be led by Duane Zitzner, currently president, Computing Systems, of HP.

• A $23 billion IT Infrastructure business, encompassing servers, storage and software, to be led by Peter Blackmore, currently executive vice president, Sales and Services, of Compaq.

• 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.

Robert Wayman, the current chief financial officer of HP, will be the CFO of the new entity. To oversee the smooth integration of the two companies an integration team under the leadership of Webb McKinney, currently president of HP''s Business Customer Organization and Jeff Clarke, chief financial officer of Compaq, has been formed.

Though Ms. Fiorina acknowledged that the integration process would be very challenging despite the comprehensive integration planning, industry observers believe that the complexities of the integration of two of the worlds largest computer companies might also create a hiatus that could benefit competitors.

Goldman Sachs advised HP on the deal, while Compaq was represented by Salomon Smith Barney.