May 9, 2002 By Brian Bergstein Ap Business Writer 4 min read

CUPERTINO, Calif. (AP) – With Silicon Valley’s harshest proxy fight fading into history, Hewlett-Packard Co. finally began absorbing Compaq Computer Corp. and announced which of the companies’ products will live and die. Standing in front of multicolored panels bearing employee pictures and the words “we are ready,” HP’s top executives told a news conference Tuesday that HP and Compaq’s Web sites had been meshed, and the 150,000 employees had gotten “playbooks” explaining the transition.

“Clearly, we are focused on building one strong new company, one strong new team, one strong new culture, and teamwork is going to be a very important aspect of our success,” chairwoman and CEO Carly Fiorina said. “The best teams are forged during difficult times, not easy times.” Fiorina and her new No. 2, former Compaq CEO Michael Capellas, revealed that HP and Compaq brands both will be sold in the consumer personal-computer market, where both companies are leading players. But in desktops and notebooks for business users, Compaq will replace HP, which has struggled to make inroads in commercial PC sales.

HP’s Jornada handheld computers are being phased out in favor of Compaq’s iPAQ line of mobile devices, which had superior market share.

In servers that run Web sites and data centers, HP will combine technology contributed by each company, such as Compaq’s high-performance computing capabilities and HP’s network-management software and proprietary operating system.

HP expects to cut 15,000 jobs over the next two years, with many positions lost through attrition and voluntary severance programs. Layoffs will begin next Monday and will be mostly completed within six to nine months, Fiorina said.

Analyst Paul McGuckin, a Gartner Inc. vice president, said he could not think of another technology merger in which so much detailed product information was available on the first day.

“In general, I think they did a great job between making hard choices and keeping revenue coming in,” he said.

“There are still some areas where I think they haven’t reached the final conclusions on what to do, but the team is to be really congratulated in having this much ready on day one.”

HP is retaining its name and headquarters in Palo Alto. It acquired Houston-based Compaq for $19 billion in stock over the vigorous opposition of former HP director Walter Hewlett, in hopes of creating more complete packages of high-tech products and services while squeezing out at least $2.5 billion in costs by 2004.

Hewlett contended that integrating Compaq would be too risky and would increase HP’s reliance on the slumping PC market at the expense of the highly profitable printing division.

The deal survived an exceedingly close shareholder vote and the apparent opposition of a large percentage of HP employees. Many analysts have said they expect Capellas, as the head of daily operations, to bear much of the responsibility of reassuring and motivating uneasy employees.

In an interview, he described himself as a hands-on manager who would do whatever it takes to reach out to the work force.

“I’m going to be out there a lot. Do I view there is a role that I can play in really bringing people together, building consensus, building teams? Absolutely,” he said. “I am absolutely a mix-it up guy. Everyone will tell you that.”

Fiorina also announced that the Compaq Center, home of the NHL’s San Jose Sharks, will be renamed the HP Pavilion in a play on the name of HP’s line of PCs. The same name switch may be made at the Compaq Center in Houston, home of the NBA’s Rockets.

Hewlett-Packard shares, which now trade under the “HPQ” ticker symbol to reflect Compaq’s presence, rose 89 cents to $19.30 in morning trading Wednesday on the New York Stock Exchange.

McGuckin said that while HP did a good job of reassuring existing customers with its immediate product announcements, its overall presentation Tuesday felt somewhat lackluster.

“I think the new HP sounds a lot like the old HP, in terms of having a deliberate, well-thought-out, logical story, but lacking a certain spark, lacking a bit of evangelism in it,” he said.

“Why is someone who was a Dell customer yesterday going to be an HP customer tomorrow? What did they hear that will change their minds? It was not the sort of inspired salvo against the competition that this company is going to need.”

—

On the Net:

http://www.hp.com