Fiorina: HP Expects $3 Billion in Savings

With plans to complete the Compaq integration almost a year ahead of schedule, HP expects $3 billion in savings by end of fiscal 2003.

Hewlett-Packard Co. officials expect to complete the integration of Compaq Computer Corp. by the end of the companys fiscal year 2003, almost a year ahead of schedule, according to Chairman and CEO Carly Fiorina.

Speaking to financial analysts in San Francisco on Tuesday, Fiorina also said that the company expects to save $3 billion in operating expenses during the same time span, about $500 million more than officials had projected before HP completed the $18.5 billion acquisition of Compaq in May.

At the same time, the Palo Alto, Calif., company on Tuesday announced the reassigning of several key officials, part of what Fiorina said was the process of incorporating the integration of the two giant companies into the fabric of HP.

"Having completed so much of the merger integration … it is time to make merger integration part of the fabric of this company," Fiorina said in the opening remarks of HPs two-day forum.

The heads of the four business units—Duane Zitzner in the Personal Systems Group, Peter Blackmore in the Enterprise Systems Group, Vyomesh Joshi in the Imaging and Printing Group and Ann Livermore in HP Services—will remain in place, as well.

McKinney will become vice president of merger integration and organizational effectiveness.

Fiorina said Shane Robison, executive vice president and chief technology officer, is taking over the HP Labs, which will continue to be directed by Dick Lampman, senior vice president of research.

During the hour-long presentation, Fiorina touted the progress of the integration. The company already has cut about $2.4 billion in costs—almost the $2.5 billion that HP had projected to achieve by the end of fiscal 2003—so company officials are pushing that number to $3 billion, she said.

However, despite the integration success, the company is not changing its financial forecasts for the first quarter or the fiscal year, Fiorina said. The economy, while stabilizing, is still volatile, and there is no indication of a significant increase in IT spending anytime soon, she said. Both are issues the company has no control over, though cost cutting and merger issues are, Fiorina said. So the company is focusing on those.

"We are accelerating this (cost savings figure) because we can," she said.

Those cost savings include about 17,900 job cuts connected to the mergers.

But while not changing the companys overall forecast, Fiorina adjusted some of the expected figures for individual business groups. For example, she said the companys most profitable unit, the Imaging and Printing Group, should see increased revenue growth for the fiscal year. But revenue growth for the Enterprise Systems Group will be slightly less than the 4 to 6 percent initially projected.

None of this came as a surprise to analysts from Goldman, Sachs & Co., of New York, who in a report on Monday predicted that HPs meeting would be "realistic but upbeat."

"We expect no change in direction type of pronouncements on the economy from HP, with HP probably sticking to its weak but steady message," the report said.