Fiorina, Capellas Unveil the New HP

CUPERTINO, Calif.—Its a new high-tech powerhouse in an admittedly slower industry.

Hewlett-Packard Co. Chairman and CEO Carly Fiorina and new HP President Michael Capellas on Tuesday introduced a new company—complete with the acquisition of Compaq Computer Corp.—that they said was now No. 1 globally in combined Unix and Intel-based servers, PCs, and external storage, and third in services behind IBM and EDS.

During a press conference, Fiorina told more than 80 reporters in the room and many more listening and watching via a conference call and a Webcast, that despite the new companys size, it was playing in an industry that "will consolidate [and] require sustainable business models." It wont return to the "heady days" of 30 percent to 40 percent growth. The new company also will ramp up R&D spending while cutting expenses.

Still, she and Capellas said, the combined company was poised to play in that market. It has more than 150,000 employees—although 15,000 are expected to lose their jobs as a result of the merger—and a streamlined product line that mirrors what had been speculated for the past several months.

"This combination makes sense in the minds of our customers," Capellas said. "They want fewer but more strategic partners who can provide seamless solutions."

HP will adopt Compaqs leading Proliant Intel-based servers, phasing out its NetServer servers by the end of the year. The company will keep its own Unix servers and for the time being Compaqs Alpha servers. Capellas said the two products were complementary, that HPs Unix servers sold well in the commercial space, while Compaqs Alpha servers sold well in the high-tech and scientific markets.

The company will move forward with both lines of consumer PCs, HPs Pavilion and Compaqs Presario, and will maintain both storage lines.

HP also will adopt Compaqs iPaq PDAs over its own Jornada line.

Fiorina said the two companies began working on these decisions even before the controversial deal was announced Sept. 4, 2001, in hopes of being ready to run out a roadmap the day the new company was announced.

Customers had spent more than eight anxious months waiting for the news, which the companies couldnt release until the deal was official. Now the company is going out informing its customers of the product game plan for the next three years. Fiorina said they have "playbooks in the hands" of all their salespeople today outlining the companys product roadmap, go-to-market strategies and services.

Starting Tuesday, HP also has integrated Compaqs Web site within HPs and switched the signs on all Compaq buildings to read HP. The site, which Capellas said is now the second largest direct marketer of it on Internet, is up and running in nine countries and offering 10,000 products.

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