The New York TimesThe New York Times TechnologyMay 8, 2002  

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Hewlett-Packard Announces New Leadership and Strategy

By JOHN MARKOFF


CUPERTINO, Calif., May 7 — Seeking to project an image of decisiveness and synergy, the Hewlett-Packard Company, freshly combined with Compaq Computer, introduced its executive team and product strategy today.

Giving only a passing nod to the bruising proxy battle fought for the last eight months with Walter B. Hewlett, the Hewlett family heir, Hewlett-Packard's chief executive, Carleton S. Fiorina, said the bitter fight had proved to be useful in building a more unified management. "The best teams are forged during difficult times," she said.

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The new Hewlett-Packard product line and organization were sketched out first at the Flint Center here, in an early-morning meeting broadcast to 100,000 of the company's 150,000 employees, and then at a meeting for the news media and analysts.

Ms. Fiorina and Hewlett-Packard's new president, Michael D. Capellas, the former chief executive of Compaq, both stressed that the new Hewlett-Packard had had plenty of time to plan the transition and integration period, which opponents of the deal had predicted would be a stumbling block. "We've had our first-draft integration plans done since before we called in the bankers," Ms. Fiorina said.

The new Hewlett-Packard has already named three layers of management and will add a fourth layer in a few days, she said. The company also has already organized the sales accounts of its top 100 customers.

The executives repeatedly emphasized that Hewlett-Packard would benefit directly from its increased size, making it either the market leader or the second-largest competitor in a range of information technology markets — from servers to personal digital assistants.

Traditionally, size has been both a blessing and a curse to the largest computer makers, who often find it difficult to execute quickly in rapidly changing markets. But executives said the new Hewlett-Packard was being assembled to compete in what it believed would be a technology market that increasingly lent an advantage to the largest players.

"This is really a play as a next-generation enterprise infrastructure provider, and the real competitor is I.B.M.," said Tim Bajarin, president of Creative Strategies, a computer industry consulting firm in Campbell, Calif.

The company also made it clear that its newly created Hewlett-Packard Services division would both compete and cooperate with giant technology industry consulting firms like EDS and Accenture.

Hewlett-Packard reaffirmed the savings it said would result from the merger, which had become a flash point for the bitter court challenge waged by Mr. Hewlett. The new company's chief financial officer, Robert P. Wayman, said that it expected savings in excess of $2.5 billion as a result of cuts in areas of duplication ranging from administration to research and development.

Mr. Wayman acknowledged, however, that in many of the company's businesses, the merger's immediate result would be lost revenue. In home PC's in particular, he said, the merged company expected to lose as much as 18 percent of its revenue.

While it has chosen either the Compaq or Hewlett-Packard name in some areas, like the personal digital assistant market, in which the company plans to terminate the Hewlett-Packard Jornada line, it also said it planned to keep some competing lines. In the home PC market, it will maintain both the Hewlett-Packard Pavilion and Compaq Presario lines.

Mr. Capellas justified the decision by saying that the company's retailers were eager to maintain differentiated products on their shelves. Analysts have said that PC retail space is one area where the new Hewlett-Packard may be particularly vulnerable to competition.

At least for the time being, he said, the computer maker will also keep alive both companies' high-end Unix computer families, where Compaq has been stronger in scientific computing while Hewlett-Packard has dominated in commercial markets.

The new company will be organized into four core business groups: enterprise systems, selling to large businesses, led by Peter Blackmore, a former Compaq executive; Hewlett-Packard Services, a consulting and support business, to be led by Ann Livermore, formerly in charge of Hewlett-Packard's service business; an imaging and printing group, headed by Vyomesh Joshi, the former head of the Hewlett-Packard printer business; and a personal systems group, run by Duane Zitzner, the former head of Hewlett-Packard's computer business.

Mr. Capellas dismissed reports of culture clashes among Hewlett-Packard and Compaq employees. He said that within product families, the companies had closely matching cultures. This was borne out, he argued, at a recent secret meeting of the companies' top 400 managers in San Francisco. "The consumer guys were talking to the consumer guys, and the enterprise guys were talking to the enterprise guys," he said, "and in the services group it was a love fest."





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