Fiorina says HP is meeting merger milestones

Carly Fiorina, CEO of Hewlett-Packard Co., said that the newly merged HP and Compaq Computer Corp. is meeting the three milestones it laid out when the companies combined. Fiorina was speaking here at the Gartner Symposium/ITxpo conference Tuesday.

Fiorina said there are three criteria being used to measure the merger's success: meeting integration milestones, meeting customer expectations, and meeting employee expectations.

"We remain either at or ahead of our integration milestones," Fiorina said.

The company announced its product road map on the first day the new company launched and has since assigned specific teams to customers, she said.

On the employee expectation aspect, Fiorina said the company has completed nearly three-quarters of the workforce reductions necessary and is working to finish the rest as soon as it can. HP is also aiming to meet its goal of letting employees know how their jobs have changed, what their new responsibilities are, and who they will report to.

When asked to grade HP on its merger thus far, Fiorina said she would give the company a B+ or an A-, but not a full A.

"As compared to what many people expected ... I think we're exceeding expectations," Fiorina said.

HP is still at work on cost-cutting measures, she added, such as procurement savings in the billions of dollars range and workforce restructuring.

On stage with Fiorina were Gartner Vice President Paul McGuckin and Vice President Betsy Burton.

Reflecting on third-quarter HP's earnings, McGuckin said, "Enterprise systems is the big disappointment."

Fiorina defended HP's position on middleware by explaining that it plans to partner with companies such as BEA Systems and Microsoft to offer middleware and Web services infrastructure.

Burton asked Fiorina how HP plans to defend its printing and imaging business, with the likes of Dell moving into that arena.

"The fact that Dell makes an announcement doesn't leave us shaking in our boots," Fiorina answered.

She continued to say that HP has fought off various threats to its printing business for the last 20 years, including Lexmark on the low-end printer front.

"Dude, you're getting a Lexmark," just doesn't have the same ring," Fiorina joked, in reference to the Dell slogan "Dude, you're getting a Dell." "My answer to Michael Dell is, 'Come on in, the water is fine,'" she added.

McGuckin also said analysts are concerned with HP's bet on the Itanium processor from Intel, saying that uptake has been slow and Gartner expects it to have captured only 7 percent or 8 percent of the server market by 2007.

"I'm not sure I agree with the 2007 [prediction]," Fiorina countered. "We think Itanium is the right bet to make."

She called the value proposition of Itanium "absolutely compelling" because of the ability to have a standard platform based on commodity servers.

"I'd much rather be making this bet than to be making the bet that Scott McNealy [CEO of Sun] is," she said.

But McGuckin reiterated Gartner's concern with Itanium. "What concerns us is the tepid support from Microsoft. Microsoft is the one company that can inspire the legions" of ISVs to write applications for Itanium, he said.

In discussing other bets that HP is making, Fiorina listed three especially important ones: heterogeneity, virtualization, and the idea that customers will stay focused on connections between applications, which will demand manageability and interoperability.

"We will provide the lowest TCO [total cost of ownership] and the best ROI," she said.

Another big bet for HP is that processes will be digitized, old and new alike. Furthermore, the digitization of processes will require the product portfolio that HP offers, she said.

HP will continue to invest in research and development, to the tune of US$4.3 billion, Fiorina said.

"That is Sun's and EMC's problem: They can't afford the R&D they need. We're focusing where we can make a unique contribution," she said.

A big chunk of that R&D budget will go toward printing and imaging, while some of it will be dedicated to software.

"We are focusing our efforts on the software in management of Web services," she said.

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