HP Moves Forward With Compaq Integration

HP filed an internally circulated memo written by Webb McKinney with the SEC about its pending merger with Compaq that outlines a bigger transition team.

Hewlett-Packard Co. filed an internally circulated memo with the S.E.C. today about its pending merger with Compaq Computer Corp. that outlines a bigger transition team, specifically names the competition, talks about a "single face to customer", and details the duties of Mike Winkler, a highly-regarded Compaq executive who will run operations in the new company if it goes ahead.

The memo, dated Nov. 7, is authored by Webb McKinney, president of H-Ps Business Customer Organization and who co-leads integration planning with Compaq CFO Jeff Clarke. The memo, filed under Rule 425 under the Securities Act of 1933, claims the core planning team is almost complete and that timelines and milestones have been established for the merger although they are not highly detailed in the memo.

Compaq and H-P have periodically filed internal communications about the union with the S.E.C. since it was announced Sept. 3, but rarely have they offered as much insight into the merger process and thinking as McKinneys memo.

A proxy statement describing the merger even more in depth should be coming shortly, according to H-Ps statement last week reaffirming the merger in the face of opposition from heirs of H-Ps founders.

"Our primary tactical goal is to have all integration planning activities completed by the beginning of February with our Day 1 deliverables for customers, employees and partners in place," McKinney says in the memo. H-P has said the merger should close in the first half of 2002 if shareholders approve it.

The goals of merger are clearly to be a stronger competitor.

"Were working on plans that would align each of the four operating units and the new company as a whole, around customer needs, focused business strategies and go-to-market models that will enable us to compete aggressively and effectively against a diversified competitor like IBM, or more focused competitors like EMC, Sun and Dell," McKinney said in the memo.

H-P also named another tier of management to the Integration Team, whose first wave was comprised of senior executives from both companies. This next layer is just from H-P and includes Pete Karolczak, information technology; Bob Shultz, finance; Jon Flaxman, value capture; Laine Meyer, real estate, Peter Van Naarden, communications and branding functional integration; Wendy Citron, brand integration; and Ed Yang, enterprise systems.

Two other aspects of the merger H-P is currently focusing on are the cultural differences between the two companies and communications about the merger. While the memo acknowledges cultural differences, it does not describe them specifically or what its doing to smoothly integrate the two sides.

However, if S.E.C. filings mean anything culturally, H-Ps Rule 425 filings, while less frequent than Compaqs, are usually more substantial about details of the merger and progress so far.

Compaqs are often FAQs, Q&As and press filings in favor of the merger.

As for communications, McKinney cautioned employees against putting stock in rumors. "Please keep in mind that you should not consider any merger-related information official that is not issued by Carly Fiorina, Michael Capellas or the Integration Office. This includes organizational announcements, as well as specific product and business details," he said.

However, anything in the way of official announcements could be at least two months away.

McKinney suggests H-P is delaying the next round of announcements about senior appointments in the new company at least until early next year. "Publicly discussing the organization at that level of detail might complicate the regulatory review process. Therefore, additional organizational announcements are not planned until early 2002," McKinney said. "We know the rumor mill is alive and well -- internally and externally."

Winklers New Role

Tight-lipped or not, McKinney singles out Winklers new duties to include responsibility for the companys global supply chain, e-commerce and global alliances. He termed Winklers Sept. 3 appointment to the post of executive vice president, Operations, in the new company as "not widely communicated."

"His organization will ensure the development of an industry-leading, end-to-end supply chain across the company, including world-class e-commerce and direct capabilities, strong customer relationship management systems, and efficient supplier relationships. The operations organization will be tightly aligned with each global business group to help us execute with maximum efficiency and consistency across all of the businesses," the memo says.

McKinney concludes by warning employees not to engage in merger activities unless they go through the Integration Office. "I must remind you not to become involved in planning for the integration or sharing information with Compaq unless you receive a specific request from a member of the Integration Office. Please keep in mind over 99% of HP is not working on merger-related planning."