Fiorinas Goal: Lessen Customer Confusion

HP Chairman Carly Fiorina says her company and Compaq have a distinct plan for transitioning customers once its proposed merger is closed.

LAKE BUENA VISTA, FLA. – Hewlett Packard Co. Chairman and CEO Carly Fiorina tried to make it clear Tuesday morning here at the Gartner Symposium that her company and Compaq Computer Corp. have a distinct plan for transitioning customers once its proposed merger is closed.

In what was dubbed a "Mastermind Interview" with Gartner Inc. executives, Fiorina attempted to dispel any notion that HP and Compaq are confused about how they will proceed once the merger is finalized. "We intend to have investment protection plans and provide very clear transition paths," Fiorina said. "HP and Compaq (before the merger news) announced we would use the [Intel Corp.] Itanium in our architectures. That eases the transition plans over time. We have detailed integration plans in place."

According to Fiorina, before HP and Compaq executives brought in the bankers to discuss a merger, they had already outlined how they could derive value from the merger, detailed what the organizational structure would be and put a regulatory plan in place.

"This is about creating a stronger company to lead in the IT area," she said.

Fiorina described as a backdrop to the merger the kinds of alternatives CIOs faced in the 90s. "CIOs have been under-served by the IT community," she said. "In the 90s it was the hot box alternative, or just Let us do it all for you, ala IBM."

She described today as the "ease of solutions era," which demands applications that can create value with better price/performance, better experience and that allow IT to remain in control of their own environments. "That requires a new company that can manage complex heterogeneous environments that you can wrap professional services around. This accelerates the strategy that HPs been on," she said.

Fiorina: Dell is No IT Innovator Fiorina again insisted that the merger will yield a cost savings of $2.5 billion for the combined firm in eliminating duplication such as having two research and development organizations, overlapping administration functions, and from procurement savings from a combined company that spends $45 billion annually. HP still anticipates a 15,000 head count reduction.

Although she cited legalities in not providing details, Fiorina said that in the first month after the merger closes, customers of the combined firms will know the plan. "[Theyll] know who their account team is and what the migration path is," she said. "Many of the product roadmap decisions arent mysterious, and many customers have already made their own decisions. The bottom line is that customers wont be confused. As soon as we get closure, customers will know."

In describing HPs view of the PC industry and its position in it, she said the merger will make the firm the number one provider of PCs, number one provider of imaging products and number three provider of professional services behind IBM Global Services and EDS.

"Clearly the industry is characterized by rapid commoditization," she said. "This combination allows us to leverage investments Compaq made in a more efficient distribution system."

In a nod to Dell Computer Corp.s leadership in direct distribution, Fiorina acknowledged that the combined firm has to be as competitive as Dell in North America. "But there is also an innovation requirement," she said. "This company is positioned to be a leader in innovation. Dell is not an IT innovator. Their reseller deal with EMC says they wont be an innovator in storage."

Fiorina denied that the Compaq brand will go away completely, although the new company will be called Hewlett-Packard in order to leverage its brand in the enterprise computing space. "Thats important because the HP brand has depth and breadth," she said. "The Compaq brand cant stretch across that. Where the Compaq brand has equity well use it."

HP will rationalize its NetAction software products with its embrace of Microsofts .Net by emphasizing vertical areas where it can provide value, such as in rich media and mobile applications. At the same time, HP will seek to exploit the customer base that Compaq brings to market its OpenView family of network and system management software.