HP Maps Out Compaq Integration

Securities analysts got an up-close look at how Hewlett-Packard Co.'s integration of Compaq Computer Corp. is going Tuesday.

BOSTON—Securities analysts got an up-close look at how Hewlett-Packard Co.s integration of Compaq Computer Corp. is going Tuesday. More dollars will be spent on research and development, inventory times will decrease for consumer and imaging products, HP and Compaq-branded computers may be targeted at different markets, and middleware software will be eliminated, HP executives said at the meeting here.

"The one thing we have proven is that IT does increase productivity," for customers and for HP, said Michael Capellas, president of the Palo Alto, Calif., company and former chairman and CEO of Compaq.

Earlier in the day, HP chairman and CEO Carly Fiorina said that savings generated by the Compaq acquisition could reach $3 billion by 2004, $500 million more than what the company had projected during the lengthy buyout process.

Regarding product lines, company merge integration executives vice presidents Jeff Clarke and Webb McKinney said some of the engineers from HPs legacy Jornada series of Pocket PC devices will keep their jobs in order to bring specific technical features into Compaqs iPaq series, which HP is maintaining.

In desktop computers, "We felt that by keeping both of the brands we could command a larger share," McKinney said. Much as car manufacturers use the same underlying design for their brands, targeted at different market niches, HP is considering doing the same, Clarke said, declining to give details or a timeline.

Executive vice presidents Mike Winkler, of HP Worldwide Operations, Vyomesh Joshi, of the Imaging and Printing Group, Duane Zitzner, of the Personal Systems Group, Ann Livermore, of Services, and Peter Blackmore, of Enterprise Systems Group, each gave presentations of their divisions roadmaps, confirming previously announced plans.

The printers and imaging business will focus on integrating with devices like PDAs, cell phones, and the Internet. Remote system diagnosis and ease of use are key goals as well, Joshi said. In professional services, "We are not having an easy integration, but a lot easier than it could have been," because Compaq and HP use many of the same back-end applications, Livermore said.

For the systems groups middleware, "the strategy will be publicly unfolded by the end of June," Blackmore said. Also in that group, HP is "catching up rapidly" to high-end storage leader EMC Corp. because of cross-selling based on HPs other IT businesses, he said.

Most analysts in attendance were pleased with the presentations. "It was good to hear where they are" in the integration cycle. I think they did a good job," said Debbie Levenson, associate of equity research, for RBC Capital Markets, in Boston.