HP/COMPAQ: HP enters risky phase

After months of detailed merger planning, the new HP is now entering a risky implementation phase, stretching out until October.

"The next phase in the merger of Hewlett Packard and Compaq will either work incredibly well or it will trip over," said Paul Brandling, the recently appointed managing director of HP South Pacific.

"We have now had very detailed planning going on for eight months, involving hundreds of employees in a clean room environment," he said. By 'clean room', Brandling is referring to planning teams being 'partitioned ' from the 'day-to-day' business for legal reasons and to allow them to remain focussed on the planning task.

Forming the new merged sales and service teams is a key element of implementing the merger plans and this involves a reduction of the combined Australian work force of 4000 by some 10 to 15 per cent. Brandling said that two processes would occur. In parts of the merged business where overlap is minimal, particularly in printing and imaging, this will involve an 'adapt and go' strategy, largely based on the existing resources.

"In other areas, with competitive situations such as having two areas sales managers when we need only one, a [merit based] selection process will be taken," he said.

Brandling added that the company would be making most of its 'people related' announcements within 30 days. However, he could not put a precise time frame around the coming retrenchments, saying that most would know within the next two to three months. The personnel selection process will not be finalised until October.

"We will complete all the work, and by October [will have] a common strategy, common goals, and [all] teams in place," he said.

Brandling is joined on the local 'senior leadership team' by Rebekah O'Flaherty who will be in charge of the Imaging and Printing Group, Tony Bill, in charge of the Personal Systems Group, and Pathy Pathmanaban, who will lead HP Services.

Brandling stressed that the 'new HP way' would be different to both the 'HP way' and the 'Compaq way'.

"We have already established the bedrock values of team work, trust and respect, and speed and agility," he said. "Sitting over these three is passion for the customer."

Pathmanaban added that a 'fast start' program is in place to role out the new culture.

Brandling claims that both sides of the merged company have gained market share momentum within Australia in recent months.

"I've been delighted that staff kept externally focussed on the customer, [and that] our business momentum has grown," he said.

However, he conceded that the company faced a significant risk and could 'lose the plot' if its people became too distracted by the merger implementation process.

The latest IDC market share figures, as supplied by HP, show Compaq ahead of HP in most segments at the end of 2001.

At that time, on a Compaq versus HP basis, the overall Australian share figures for servers were 32.9 per cent and 9.4 per cent respectively, storage shares were 22.9 per cent and 9.3 per cent respectively, PCs were 13.2 per cent and 7.2 per cent respectively, pocket PCs were 66 per cent and 23 per cent respectively, and overall printer shares had Compaq down on 2 per cent and HP on 30 per cent.

Estimated 2001 services revenues, according to IDC, was Compaq earning $446 million and HP earning $220 million.

Pathmanaban says the company will make 'significant' investments into its services business over the coming months.

He described the key focus areas as infrastructure support, consulting and integration (with a technology emphasis, not management consulting) and managed service outsourcing.

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