A Smooth Acquisition

By Jeffrey Burt  |  Posted 2005-02-14 Print this article Print

The acquisition itself went reasonably smoothly, observers said. HP was able to merge the companies and product lines well. It was after the merger that the key problems arose.

Fiorina reorganized several business units, last year folding the enterprise storage and server business into the services unit, and last month bringing the PC business under the control of the Imaging and Printing Group.

Problems surfaced in the third quarter of last year, when the Enterprise Storage and Server Group, hobbled by mistakes in a massive SAP AG migration and by deep discounting by some resellers, reported a $208 million loss.

HP rebounded in the fourth quarter, but criticism of Fiorina continued to grow.

Reports began circulating last month that the board, concerned with HPs results under Fiorina, was debating distributing some of her duties to other executives, something HP spokespeople denied.

Under Fiorina, HP became caught in two tough paradoxes, Forresters Gillett said. It wanted to be a vendor of commodity products that could compete with Dell on the low end but also be a premium dealer of distinctive technology.

At the same time, it was making an aggressive push into the commercial space. "Each one of these is tough," Gillett said. "Putting them both together is really difficult."

The result was a company that could do all these things, though none exceptionally well, and that was unable to clearly define itself to the industry and its customers.

Customers are waiting to see if the impact of Fiorinas resignation will filter down to them.

"Whenever you have a larger enterprise and you strike a strategic partnership with a vendor, you assess the continuity of the products and services," said Nelson Ramos, CIO and enterprise IT strategist for Sutter Health, in Modesto, Calif., and an eWEEK Corporate Partner. "The concern is how different organizations that comprise HP are realigned. Once the new leadership comes in, some product lines may be emphasized over others."

Senior editors Carmen Nobel and Paula Musich contributed to this report.

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