HP to have merger map in 100 days
Like a newly inaugurated president, the new Hewlett-Packard is giving itself 100 days to flesh out its strategic vision.
Jim McDonnell, vice president of worldwide marketing for the business customer unit at HP, said Wednesday that the transition team charged with overseeing HP's acquisition of Compaq Computer will try to formalize a strategy for how the new company will operate in relatively short order.
"Within 100 days, we should have a very, very solid plan," he said. "We believe we can combine the strengths of the two companies and discard the weaknesses."
The need for speed grows partly out of concerns over the gargantuan task of combining the two companies, which have combined annual revenue of approximately $87 billion and many overlapping departments.
Analysts, industry executives and others have said the inordinate amount of time Compaq took to formalize its acquisition of Digital Equipment is one of the principal reasons for the company's decline since 1998.
In fact, the plan, which will only be shared internally, will likely be finished well before regulators approve the merger, a process that takes about six to eight months. Webb McKinney, vice president of HP's computing group, and Jeff Clarke, Compaq's chief financial officer, are heading up the integration team.
HP's transition plan will have to tackle a number of issues. Because of the merger, HP finds itself responsible for supporting multiple server operating systems, for example: Linux, Windows NT, OpenVMS, HP-UX and Compaq's own version of Unix, among others.
Eventually, HP will converge toward Linux, NT and Unix, according to McDonnell. The challenge will lie in coming up with a product road map that will push customers toward a more streamlined OS portfolio without alienating them.
The transition plan will also likely include internal product road maps, plans for combining different departments and plans for explaining how the merger will benefit large corporate customers, he said.
The plan, however, won't look into issues such as pricing, technological cooperation or other issues that might violate antitrust laws in countries were HP does business. The public also won't see the strategic plan until after regulatory approval is granted, if then. "It is not going to be shared externally," McDonnell said.
While acknowledging the difficulty of the task ahead, McDonnell said it should be an easier task than when Compaq bought Digital.
"They were completely different types of companies," he said. "The cultural differences between Compaq and HP are relatively minor."
On other notes, McDonnell termed the largely critical response to the merger by Wall Street analysts and the press as superficial. Shares in both HP and Compaq have declined sharply since Tuesday. When the merger was announced, HP's stock offer amounted to $25 billion. By Wednesday night, it was down to $18 billion.
Many critics have looked at the merger as a deal between two PC companies, he noted, although HP and Compaq operate in many other markets.
"We thought a lot of the industry reaction was very superficial," McDonnell said. "This is not about a PC company. This is more than a PC company."
McDonnell also hinted that the combined company may continue HP's strategy of outsourcing manufacturing. Over the past few years, HP has increasingly shifted manufacturing to contractors. Compaq has too, but it has also attempted to create a build-to-order manufacturing facility, a la Dell Computer.
The manufacturing strategies of both companies are fairly complex, but he added that "Compaq has made moves toward outsourcing."