New HP Retains Most Products
Compaq's IPaq supplants Jornada, and HP business PCs will eventually retire, in revealed merger road map.Peggy Watt, PCWorld.com
CUPERTINO, CALIFORNIA-- The new HP, born of its merger with Compaq, will retain the desktop and notebook PC lines of both companies--for now--although the Jornada handheld family will be survived by the IPaq line of competing devices originally introduced by Compaq.
Consumer and business buyers may find system prices remain stable, or even drop, as the much larger company exercises its buying power to get better prices on components, executives and analysts suggest.
Product Plans
The new HP is marketing the desktop and notebook products of both companies on its newly redesigned Web site, launched early Tuesday morning, when the merger took effect. But all of HP's professional desktop and notebook systems will migrate to the Compaq brand in the next year, executives say. The HP Vectra line and Omnibook products will be phased out. HP's E-pc products will continue to be sold, as will Compaq's Evo series.
Compaq's Presario and HP's Pavilion line of consumer PCs will continue to compete in some countries where sales of both are strong, although only one brand will be offered in others, HP executives say. HP plans to focus on each brand's strength, touting Compaq's wireless and home networking features and HP's digital imaging tools.
Handheld devices are apparently a priority of the new HP. Compaq's popular IPaq Pocket PC is being renamed the HP IPaq Pocket PC, while the Jornada handheld line will be phased out. The Compaq IPaq BlackBerry will be retained, under the HP name. "One of our goals is absolute leadership of mobility with the IPaq family of products," says Michael Capellas, now president of HP and formerly chief executive of Compaq.
HP's printer division is already an industry leader, but the merged company is clearly putting a priority on what it calls imaging and printing products. New product lines, particularly photographic tools and Internet graphics products, are in the works for both business and consumer markets, Capellas said. "We're obviously the king of the hill and looking for the next fight," he said.
Top Sales Claimed
Jubilant executives of the newly merged company gave an overview of their immediate plans here Tuesday. First steps include the prompt combination of product lines, from consumer products to servers, storage devices, and systems of most concern to enterprise customers. The new Web site already supports sales of combined product lines and has some 3 million pages. Executives maintained their estimate of 15,000 layoffs from redundant positions in the merged company, but gave no details, saying those changes will occur over the next six to nine months.
They claim their combined $18 billion in consumer and small-business sales gives them the title of the world's largest consumer technology company. Also, the new HP says $14 billion in sales makes it the single largest technology supplier to small and medium-size businesses. It trails in enterprise systems and services, but that has long been named one of the key growth areas for the now-combined forces.
The HP name and logo is retained, but the "new HP," as executives kept calling the company, has a new stock ticker symbol--HPQ--that combines attributes of the two firms. Chair and chief executive is Carly Fiorina, HP's controversial CEO who waged an unanticipated and contentious proxy fight with the founders' heirs over the merger.
A new board of directors will include members of each company's previous board--notably minus Walter Hewlett, who led opposition to the merger, and who was not renominated for HP's board in April. Corporate headquarters is in Palo Alto, California, and sports stadiums in both San Jose and Houston, originally sponsored by Compaq, are being renamed for HP.
Before meeting with the press, executives presented HP's new look to more than 100,000 employees worldwide, in person and over a Webcast. Fiorina and Capellas called the reception enthusiastic.
Bargains for Buyers?
Creative Strategies analyst Tim Bajarin concurs with the new HP's prediction of cost savings that could even result in product price drops. The company should be able to manufacture systems more cheaply because it will enjoy an economy of scale from its volume purchase of materials.
"They expect a 10 to 15 percent savings on components, because of the combined buying power of the two companies," Bajarin says. "The most important thing is that clearly they'll have a very broad line of products, and if they get the effect of costs dropping, they should keep prices in check." In fact, Fiorina projects a $2.5 billion savings by eliminating redundant operations and exploiting volume purchasing power.
Over time, Bajarin expects, HP will blend the lines. "They can't have 10,000 products forever," he adds. "But it is a wise move to support both at the consumer and retail model today."
Market share was the deciding factor with the head-to-head product lines, like personal digital assistants, Capellas said. "Compaq had the IPaq in the market from day one, and we've created a lot of buzz." The new HP plans to expand the IPaq name on other mobile devices in the works, he noted.
Competitor Dell has succeeded against larger competitors through savvy business efforts, and expects to continue to compete against the new HP, said Michael Dell, CEO of the rival PC maker.
"By and large, I see it as an opportunity for us," Dell said. "A company always has to be scared when other companies merge together and are bigger than you. But size and absolute scale are not everything." He said he also expects HP and Compaq will have a challenge merging their corporate cultures--regardless of the much heralded extensive planning by the partners.
Extensive Preparation
Both analysts and the executives note that the proxy fight, while undesirable, has forced the teams to work together closely to prepare for the merger and present a united front when it was finally approved. After a close shareholder vote and last-minute court challenge, Walter Hewlett said he would support the merger.
"I believe the best teams are forged during difficult times," Fiorina said. "Although I would not have wished for this proxy contest, I can tell you we have forged a very strong team because of it."
Fiorina has repeatedly touted the companies' ongoing efforts to assess product lines and determine their road maps as a merged company, and new product managers were ready to step into their new jobs and meet with customers immediately.
"We have spent literally a million-plus people-hours planning this integration," Fiorina said at the merger announcement. "In integration planning, we already made our tough decisions. So on day one we are implementing them, rather than making them."
Bajarin calls the effort "more united than any merger introduction I've ever seen." It was a notable improvement over Compaq's previous mergers with Tandem and with Digital, he adds.
Research and development is a priority of the new HP, Fiorina says; the company has budgeted more than $4 billion annually for research. The "heady days of 20 or 30 or 40 percent growth" of the nineties is over for the technology industry, she added.
In the enterprise market, the company will be able to meet customers' frequent desire for clear interoperability among diverse products, because it has such a broad product line. However, the executives repeated an HP commitment to industry standards and open architecture.
Anne Ju of the Medill News Service contributed to this report.