HP/COMPAQ: HP, Compaq CEOs preach merger

Tag-teaming to promote the proposed Hewlett-Packard (HP)/Compaq Computer combined entity, Chief Executive Officers (CEOs) Carly Fiorina, of HP, and Michael Capellas, of Compaq, on Tuesday pushed a vision of an IT infrastructure powerhouse predicated on open standards, heterogeneous platforms, product innovation, and partnerships.

In a wide-ranging interview with International Data Group Inc. editors here at the Gartner Symposium ITXpo, the chief executives touched upon product integration plans, justifying a continuation of multiple operating systems and server-level products. The two also presented a three-tiered plan for their professional services arm and elaborated on Web services initiatives related to HP's eSpeak product, its Bluestone Software Inc. acquisition, and Microsoft's .NET.

Acknowledging surprise at the extent of negative reaction to the merger on Wall Street and within parts of the IT and business community, Fiorina and Capellas nonetheless projected confidence that the deal will succeed in the end.

"This is not a one- or two-quarter deal. It's got to be viewed long-term," said Capellas. "In this industry, we've grown accustomed to the short-term gain, but that's not reality anymore."

Citing a regulatory gag order, the two executives just skirted the perimeter of detailed product integration plans. But both were quick to assure that product road maps and customer migration paths are in place, to be revealed immediately following approval of the deal.

"We had drawn up integration plans for product lines months before we called a banker," Fiorina said. "As soon as we have approval, customers will know these plans. In the meantime, we encourage our customers to continue buying from where they normally do because it will still be the right choice."

HP, in Palo Alto, California, and Compaq, in Houston, also will dole out "investment protection programs" to all customers ordering new products prior to the completion of the merger, she said.

About 60 employees are currently working on so-called "clean" integration teams that have been separated out from the two companies' day-to-day operations to sort through the challenges of melding two product lines.

On the platform front, Fiorina and Capellas pledged support for their variety of OSes, including Unix flavors, Linux, and Windows, because each plays "multiple roles" in the computing environment. But in terms of processor architecture the combined company will place all its bets on Intel.

"Anyone who thinks they'll outperform Intel architecture is sorely mistaken," Capellas said.

Fiorina stressed that the "new HP" will specialize in integration between the multiple OSes while leveraging the applications, management, platform, and consulting prowess of partners such as SAP, Intel, Microsoft, Accenture, and PricewaterhouseCoopers.

Those partnerships will more make product transitions easier for HP -- vis a vis rival Sun Microsystems, for example, who must go it alone on platform and applications upgrades when it transitions to a new version of its Sparc processor, Fiorina contended.

On the server side, the executives argued that there is less than 5 percent overlap among the companies' four classes of systems: high-end fault tolerant, technical-computing, commercial Unix, and industry standard.

"The overlap here is complementary," said Fiorina, declining to say whether any of the above categories would be phased out as a result of the merger. "They serve to broaden the footprint and allow us to attract more applications providers and ISVs."

With the ailing hardware market quickly commoditizing, professional services had been a sought-after business initiative of both companies prior to the merger. Moving ahead as a combined services entity, Fiorina said the company aims to compete with rival and industry giant IBM Global Services -- and do so more efficiently.

"The IBM model is safe, but it's expensive and time-consuming," she said. "I know that we can complete a transaction more quickly than they can."

The new HP is diving into services on three levels, Capellas said. Its most dominant market will be customer support services, where the combined company expects to experience 3 percent to 5 percent growth during three years, he said.

In addition, the company will attack the managed services and application outsourcing markets, with the assistance of software partners. Finally, the new HP is moving into systems integration at the technical services level, serving vertical markets such as telecom, manufacturing, and financial services.

"Where we don't want to be is in the business process world [of systems integration]," Capellas said. "In that realm, we'll partner."

Other emerging opportunities for services include the wireless arena and storage, he added.

As part of its push to partner, Fiorina and Capellas underscored a commitment to Microsoft's .NET framework for Web services. Responding to questions about HP's own Web services initiative, NetAction, Fiorina said the J2EE (Java 2, Enterprise Edition)-based suite resulting from its Bluestone acquisition last year remains a critical piece of its strategy. However, HP's heralded eSpeak initiative, seen as a vanguard in the Web services space, is now taking on a new role.

"When eSpeak first came out, it was considered a standalone technology. That was improper positioning," Fiorina said. "It's part of the UDDI [Universal Description, Discovery, and Integration] consortium and all about brokering. It's not a product, but a capability that is critical to mobile Web services going forward."

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