HP: Merger Could Net $3B in Savings

 
 
By Jeffrey Burt  |  Posted 2002-06-04 Email Print this article Print
 
 
 
 
 
 
 

HP executives, who say savings from the Compaq merger could reach $3 billion by 2004, claim the integration of the two companies is on schedule.

Executives with Hewlett-Packard Co. told securities analysts in Boston Tuesday that savings generated by the acquisition of Compaq Computer Corp. could reach $3 billion by 2004, $500 million more than what the company had projected during the lengthy buyout process. That includes the 15,000 jobs that the Palo Alto, Calif., company will cut, 10,000 of which should be eliminated by Nov. 1, according to Chairman and CEO Carly Fiorina. The additional 5,000 will occur early in 2003. Jeff Clarke, who with Webb McKinney is leading the integration efforts to merge the two IT companies, said the job cuts are ahead of schedule, thanks in part to a voluntary early-retirement program instituted by HP. Clarke said as many as 9,000 of the job cuts could be gleaned through the voluntary program.
Other cost reductions will come through procurement and supply chain synergies—up to $800 million—and the closing of manufacturing facilities and administrative offices. Worldwide, HP expects to reduce overall office square footage by 19 percent, Clarke said.
Overall, the executives said the integration of the two companies is on schedule, and, according to McKinney, it will continue to gain momentum now that the $19 billion buyout is complete. "The only thing thats really changed is that weve moved from planning to implementation," he said. McKinney added that HP is free of many of the legal constraints that hampered it before the sale was closed May 7. The company has rolled out its product road maps, outlining which products will remain and which will be phased out. Customers spent seven anxious months awaiting the road maps, which HP was unable to release until the two companies became one.
But, according to Chief Information Officer Bob Napier, as important as the road maps was making sure that the companys infrastructure was sufficiently integrated so that the companies could operate as one the minute the sale was completed. Napier said that the minute the buyout was official, 229,000 e-mail mailboxes were merged into one system that now handles 24 million e-mails a week. "Everybody had an HP.com address," Napier said. The company has integrated 1,000 voice mail systems and 220,000 desktops, 1,193 sites were networked, and 39,000 network devices merged, he said. "We could interconnect by throwing a few switches around the world," Napier said. Directory services were updated, the Web sites of the two companies were merged, employees were all assigned a single sign-on, and the companys employee portal was updated and ready to go, he said. Napier said that most of this was done in the months leading up to the sales closing and went off with few hitches. "It was like Y2K," he said. "It was a non-event." By May 2003, the company expects to complete the integration of key systems, such as enterprise resource planning, financial, supply chain, customer relationship management and human resources systems, and reduce the number of applications it runs. Already 7,000 applications have been tagged for elimination, Napier said. Look for updates to this story throughout the day.
 
 
 
 
 
 
 
 
 
 
 

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