Top 10 technology merger mistakes

2. HP and Compaq
Iain Thomson: You may be aware that Carly Fiorina is running for office in California, with the support of figures like Sarah Palin. I was amazed to see Fiorina espousing her business credentials in the campaign as a reason to elect her.

If the HP/Compaq merger is anything to go by, that's like Simon Cowell citing his diplomatic skills in an interview for the job of UN Secretary General.

Fiorina deserves credit for becoming the first woman to lead a Fortune 20 company, but the merger with Compaq was, in my opinion, disastrous for HP. She went on the acquisition trail early after being appointed and, after a failed bid for EDS, set her sights on Compaq.

It was a long and hard fight, principally with the son of one of HP's founders Walter Hewlett. The decision could have gone either way, given Deutsche Bank's involvement.

Hewlett alleged that a backroom deal had been done to pay off the bank (Deutsche later agreed to bay a $750,000 fine for its conduct during the takeover while admitting no wrongdoing) but Carly got her way and bought Compaq for $25bn.

It was a great day for Fiorina, being head of the biggest computer company in the world, but the deal wiped a quarter off the share price of HP within days and left investors worried.

These worries grew until eventually Fiorina was forced out by the HP board, leaving the company's share price at around half what it was when she took over.

Part of the problem was that, while the grand vision was there, the implementation wasn't and the smartest people left HP and Compaq in search of more pleasant places to work. The R&D division was gutted and engineering became second to sales.

You could argue that HP wouldn't have been the mega-vendor it is today without the mergers, but it's also fair to point out that HP might well have been far more successful on its own, and that the company is a shadow of the innovative centre of excellence that made it such a technology gem.

Shaun Nichols: A while back Iain touched on purchasing market share rather than solving internal issues. The HP/Compaq merger was a textbook case of this.

Many will argue that the deal was a questionable idea executed poorly. Fiorina had already caused a rift with HP's old guard, and the Compaq deal only furthered that. Walter Hewlett famously launched a proxy fight to stop the merger from taking place.

Even after the deal was completed there were stories of integration woes and conflicts that surpass those of your average corporate merger. The economic downturn didn't do much to help matters, nor did the ongoing feud with Dell.

In the meantime, HP's board continued to fall into a state of dysfunction that eventually culminated in a spying scandal. Eventually Mark Hurd was able to right the ship (well, until recently) and the initial goal of turning HP into an all-around IT power was achieved. But it was most certainly an ugly, ugly process.

1. AOL/Time Warner
Shaun Nichols: Many would point to this $164bn merger as the height of the dotcom boom and the financial madness that it wrought.

At the time, the move caused some to wonder whether the two firms hadn't banded together to create a media monopoly that would dominate multiple facets of the economy. It turns out they didn't have much to worry about.

AOL made its fortune from the online infancy of the public. Most consumers had little to no idea on navigating the internet or connecting with others online. AOL's simplified set-up and aggressive marketing tactics helped the company rack up a huge user base early on.

It wasn't long, however, before tens of millions of AOL users came to the conclusion that the walled garden, dial-up ISP service that the company offered just wasn't very good.

Within a couple of years, AOL tanked as a service provider and the new conglomerate was struggling to stay afloat. AOL was soon cast off on its own and forced to rebrand as a web portal.

Facebook take note: unhappy customers will eventually flee, no matter how big you might be right now.

Iain Thomson: You know, I really didn't want to put this one at number one but try as we might we couldn’t think of a bigger corporate merger cock-up than this.

It's possible to see the merger as an enormous success. Possible, that is, if you're Steve Case or any of the other senior AOL managers who saw their net worth go stellar. However, for the other six billion or so people on the planet, it was a roadcrash of epic proportions.

Maybe it was the absurd euphoria of the time. We'd made it through the millennium rollover without a worldwide systems crash, and the mood was high. But for Time Warner executives to agree to value an ailing ISP over and above their own employer was an amazing fail. If I didn't know better I'd suggest someone had slipped Gerry Levin a mickey.

He's since acknowledged it as the worst mistake of his career and it's difficult to disagree. But with the benefit of hindsight it could be argued that such mergers, albeit on slightly more sane terms, were the future, and the deal was ahead of its time. Much, much too far ahead. You can't do a media empire on a 54k modem.