A case study in media relations

Sometimes I just have to point something out, even if it’s nothing to do with AR. The BBC is carrying this news about HP’s purchase of Mercury Interactive:

Hewlett-Packard, the computer and printer company, has bought Mercury Interactive for about $4.5bn (£2.4bn). Hewlett-Packard, or HP, is looking to boost its software business, which will be worth $2bn after the acquisition.

Look at the numbers I have set in bold. It’s a howler. If HP is paying $4.5bn to add Mercury to its software business, then surely the enlarged business will be worth much more than $4.5bn? Otherwise, the value of Mercury would seem to be $2.5bn less than the sticker price on the whole HP software business. HP is paying much more than the market thinks Mercury is worth, but not that much more. If it is lucky HP will also get Chris Lochhead, the Mercury marketing supremo who is worth his weight in gold.

In fact, $2bn will be HP’s annual software revenue after the deal is completed. Mercury is generating around $700m in revenue each year; the firm also has almost $600m in equity [after liabilities].

Somewhere along the communications line, someone didn’t know the difference between annual revenue and actual worth.

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