HP to Shave $500M by Years End

Job cuts to help company reach cost-cutting goals for Compaq acquisition.

Even as the bitter eight- month battle over its buyout of Compaq Computer Corp. enveloped the company, HP Co. executives maintained the real challenge would be merging the two companies once the $19 billion deal was completed.

Last week, Chairman and CEO Carly Fiorina and other HP executives told financial analysts here that the myriad internal integration projects were on target and, in many cases, ahead of schedule.

As part of that integration, the Palo Alto, Calif., company will eliminate 10,000 jobs by Nov. 1 and 5,000 more early next year, which will help HP cut costs by $500 million by years end.

"Its amazing how much you can get done when you dont have to count votes," HP President and former Compaq Chairman and CEO Michael Capellas said at the conference, contrasting the fast-moving integration efforts with the proxy fight the two companies waged with former HP director Walter Hewlett.

Highlighting the progress it has made, CIO Bob Napier said by the time the company launched the "new HP" May 7, he had integrated 229,000 e-mail mailboxes, 1,000 voice mail systems and 220,000 desktops and networked together 1,193 HP and Compaq sites worldwide.

By next May, the company said it expects to complete the integration of key systems, such as enterprise resource planning, financial, supply chain, customer relationship management and human resources systems, and reduce the number of applications it runs. Already, 7,000 applications have been tagged for elimination, Napier said.

HP is also hitting its financial goals, Fiorina said. She predicted the company will see $500 million in cost savings by the end of fiscal 2002 and $2.5 billion by the end of fiscal 2003.

Much of those cost savings will be achieved by reducing HPs work force of 150,000 by 15,000 employees. Thanks to the success of a voluntary retirement program, HP executives said they expect to eliminate 10,000 jobs by November. "We think moving faster on head count reductions is good for employees, particularly when it reduces uncertainty," Fiorina said.

Led by Webb McKinney and Jeffrey Clarke, HPs integration team has already rolled out the product road maps, outlining which HP and Compaq brands will survive.

"As for hard-and-fast maj or changes, we havent seen anything," said John Sheaffer, CEO of The Sysix Cos., a technology provider in Westmont, Ill., that resells HP- and Compaq-branded products. "There are some concerns about how quickly they may discontinue some products. But right now, I have seen very little changes, and everything is shipping as expected and were not having any problems."