IT FORUM - HP/Compaq won't fire Euro sales, services staff

At least in Europe, the merger of Hewlett-Packard (HP) and Compaq won't lead to massive layoffs among sales and service employees, HP Chairman and Chief Executive Officer (CEO) Carly Fiorina said Monday.

"We will not be cutting back on feet on the street (in Europe). With this one move we have doubled the size of our sales force and doubled the size of our professional services," Fiorina said in a question and answer session here at International Data Corp.'s European IT Forum. She took questions after a keynote speech she delivered via satellite from the U.S. because of travel restrictions after the attacks on the U.S.

European management at "the new HP" will be hit, as the company seeks to save US$2.5 billion annually through operational synergies, largely by slashing 15,000 jobs.

"We have overlapping management in some cases. That's a question of making personnel decisions in as rapid a manner as we can," Fiorina said, noting that the management structure at HP and Compaq across Europe is very similar.

Fiorina also said the Compaq brand won't disappear.

"Compaq isn't going away. The Compaq brand has a lot of equity. We will be using the Compaq brand in some of our products," she said.

In her keynote, Fiorina defended the takeover of Compaq and responded to criticism voiced by analysts and others that the merger is a defensive move and in response to PC market consolidation.

"This is not about PCs, but about enterprise computing. The real synergies in this merger come from enterprise computing, not PCs. This is not a defensive move; it is an offensive move. About leading, not following. We intend to reshape the economics of the industry and our competitors will follow," she said.

Fiorina touted "market unifying standards and architectures," which HP/Compaq intends to follow, as the way ahead for the technology industry and the key for customers to be in control. She took a blow at rivals IBM Corp. and Sun Microsystems Corp. as businesses that "sell to the customer once and collect proprietary margins for years to come."

Vendors who rely on vertically-integrated proprietary technology architectures will lose the battle with vendors who choose open standards, as the technology industry becomes comparable with the home entertainment industry or the automotive field, Fiorina said.

"Vertical integration didn't work for Henry Ford and it won't work for IBM or Sun," she said.

Taking a swipe at Dell Computer Corp., Fiorina said that vendors who solely base their business model on volume and velocity will not be able to survive in the long term, because of a long-term lack of research and development, marketing and sales power.

Talking about services, Fiorina admitted that a combined HP and Compaq doesn't match up with rival IBM Corp., but said it can compete by acquisitions, or by partnering.

"Certainly we are not of the scale yet as an IBM in the area of outsourcing and consulting. We would need to either grow organically or do some opportunistic acquisitions. We are a strong partner of Accenture Ltd., PricewaterhouseCoopers LLP, KPMG LLP. We have an opportunity to solidify a certain set of new partnerships, and interestingly all of those partners have a common enemy," Fiorina said.

Looking ahead, Fiorina said the disastrous terrorist attack on the U.S. has dipped the economy into further uncertainty.

"I do not see a rebound at anytime in 2001, it is more likely in the second end of 2002. It would not be a hockey stick rebound, but a gradual rebound. With last week's events, honestly, it is very difficult at this point. It is too soon to tell."

The merger won't be affected by the terror in the U.S. or by the slide of HP and Compaq stock after the merger announcement, Fiorina said.

One member of the audience noted that Fiorina is grim about the economy and isn't looking to the future.

"This is confirmation that the recession will last more than one year, that nobody is confident about recovery. Also, I haven't seen any dependable forecast about new technology surfacing," said Gianmario Motta, a director at Italian IT services company Informatica and Telecomunicazioni SpA.

"We've seen orientation into the past, instead of the future," he said.

IDC's European IT Forum continues until Tuesday Sept. 18.

Photograph: HP's Carly Fiorina.

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