At the launch of the “new HP” this week South African country manager Henry Ferreira aptly mentioned the old adage “success is 90% attitude, 10% aptitude”.
The recently approved merger of Hewlett-Packard with Compaq is the largest technology-industry acquisition to date, a deal of nearly $20-billion.
Commenting on the enterprise solution group for which he is also responsible, and summing up the idea behind the merger, Ferreira says, “We’re really hoping one plus one is going to equal three.”
But the merger has been the source of much contention.
Industry analysts question how joining two computer companies that essentially compete for similar markets will be good for shareholders and consumers. Dissenters argue that the merger will dilute HP’s flagship high-margin printer business. One technology pundit described it as “watching a train wreck in slow motion”. Even Walter Hewlett, son of co-founder Bill Hewlett, claimed it was headed for disaster.
HP chief executive Carly Fiorina has succeeded and fought off Hewlett’s spirited challenges. It hasn’t been a clean battle (Hewlett lost his place on the HP board as a result) but the deal has been done. And with so many dissenters, it required a lot of attitude to get here.
When it was announced last Friday that HP had successfully bought Compaq for $18,69-billion in HP stock, Fiorina, the first female CEO of a top 20 United States company, had pulled off the biggest acquisition the technology industry has seen to date. In the end shareholders approved the deal by a slim 3% margin.
One million man hours went into the merger, with 1 600 people working on the integration of all levels of the merged companies, including product road maps, information technology and human-resource processes.
Decisions made include phasing out some ranges of individual brands, including the popular HP Omnibook line of notebooks and the Jornada handheld model. The booming market for the latter will be serviced by the highly popular iPaq, rebranded as the HP iPaq. Business desktops and notebooks will become the Compaq Evo brand, and consumer notebooks and desktops will be a combination.
“We have the coolest devices coming out to market,” says former Compaq country manager Dave Reddy, adding that the new HP aims to “leverage HP’s strength in retail and Compaq’s strength in products”.
One of HP’s core strengths is, of course, printers. This alone is a $20-billion business, but as Zibusiso Sithole, South African head of the imaging and printing group, notes, this is just 4% of the global and total printing market, including till slips and invoices. HP wants to convert the 18,4-trillion papers printed last year, mostly by analogue means, into its vision of digital printing and publishing.
It’s hard to say what the effect on South African business and consumers will be, or how prices will change for local users, but the protagonists are highly optimistic.
The “new HP” has been catapulted into the top spot for a variety of market segments, including PCs, servers, external storage and printing. Its combined computer and printer sales are estimated at $80-billion.
It is now third in the all-important services market, behind IBM and EDS.
Such services, including consulting, are widely thought to be the way technology firms need to go to invigorate revenue streams on an ongoing basis. HP can now offer a one-stop shop for buying technology and related services, like the industry-leading IBM does.
The Register, the sarcastic British technology publication, was one of the most critical, and amusing, commentators on the merger. “Fiorina set out to buy a services company, and plumped for PriceWaterhouseCooper. This was widely praised as a shrewd strategic move,” it wrote.
“Although HP has a stellar R&D [research and development] department, long-standing loyal enterprise customers, unique big-iron expertise, a go-ahead storage division and a big PC business, she wanted something different. Something that could add to the business: something to differentiate the venerable Silicon Valley pioneer from its competitors. Something really different. A USP [unique selling point].
“But the bid failed. So she bought Compaq, which has a stellar R&D department, long-standing loyal enterprise customers, unique big-iron expertise, a go-ahead storage division and a big PC business.We entirely understand. You can’t always get what you want. Shopping sucks.”
One key criticism was that competitor computer-makers such as direct seller Dell would steal business by tapping into customer uncertainty while the merger was sealed. This took eight months to clear competition hurdles, shareholder voting and Walter Hewlett’s legal attempts to stop it.
The new HP says both it and Compaq significantly outperformed the competition while waiting for the merger.
Quoting figures from research house IDC, Ferreira says that in the past three quarters “Compaq grew at twice the market and HP grew at one-and-a-half times the market. While all of this was going on, we were minding the shop. Our motto was to focus on the customer and on business until further notice, so we could merge two successful companies.”
But Ferreira concedes that “time is our enemy right now, [we] have to work against the clock” to implement the ambitious merger plans thrashed out by representatives of both companies in the “clean room” where negotiations took place.