HP: Adopt and Slow Down

Hewlett-Packard Co.s unveiling of its plan to integrate the companys vast product line with that of newly acquired Compaq Computer Corp. served to underscore one of the huge challenges facing HP. At the core, many say, is a balancing act of consolidating competing product lines while at the same time upholding commitments to customers who invested in HPs and Compaqs most expensive technology.

In plotting HPs integration strategy over the past eight months, company executives vowed to use an “adopt and go” strategy, essentially choosing to embrace best-selling products and letting go of their competing lines.

As part of that plan, HP announced last week it will phase out its Intel Corp.-based NetServers, its eVectra commercial PCs and Jornada handhelds and adopt Compaqs more popular ProLiant servers, commercial PCs and iPaq Pocket PCs. While such consolidation is key to HP squeezing profits from its $19 billion buyout of Compaq, the moves angered some customers.

“I worked very hard for eight years to turn our server room into an all-HP server room that includes the hardware, software and services,” said Matt Merrick, executive vice president of IT at Merrick Printing Co. Inc., in Louisville, Ky. “Now they turn around and basically say that their product wasnt the best product available. … It makes me feel like they dont care about their customers.”

Wary of evoking similar reactions from its largest corporate accounts, HP, of Palo Alto, Calif., announced it will not redraw road maps for Compaqs AlphaServer line, which largely competes with HPs own Unix-based servers. Such high-end servers can sell for millions of dollars.

“You dont want to truncate high-end systems lives in six months, as you might a PC,” HP Chairman and CEO Carly Fiorina said last week. “You want to migrate customers off of those platforms onto new platforms over time.”

Houston-based Compaq announced last summer that it would phase out Alpha processors and migrate to Intels 64-bit Itanium chip in three years. As a result, HP committed itself to releasing two more versions of the Alpha processor, selling AlphaServers through 2006 and supporting those systems through 2011.

HP also held off consolidating the high-end storage products and will continue to offer HPs XP series, manufactured by Hitachi Ltd., along with Compaqs StorageWorks Enterprise Virtual Array. As for midrange products, HP will phase out its VA series over the next 18 months to three years in favor of Compaqs Enterprise Modular Array line.

On the low-end and network-attached-storage front, HP will continue to offer Compaqs legacy hardware.

But HPs road map decisions, delayed in part by a long proxy battled headed by HP heir Walter Hewlett, came too late to keep some customers.

“We did abandon StorageWorks because of the interim merger. We werent willing to bet our chips on that one,” said Doug Roberts, manager of system services at Hannaford Brothers Co. The Portland, Maine, company last fall chose IBMs high-end Shark platform.

While longtime Compaq customer Michael Sherwood was impressed by how many Compaq products survived, he said the decision came “too late for us. Were already switching to Dell [Computer Corp.].”

Sherwood, director of IT for Oceanside, Calif., said merger-related issues were too much to bear.

“We were calling Compaq, and no one knew who was doing what or what would happen next,” Sherwood said. “I just didnt want to deal with it anymore.”

As for consumer PCs, HP will continue to offer HP Pavilions and Compaq Presarios.

Additional reporting by Evan Koblentz

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