A perfect match?

When you've been married a few times, by the third or fourth wedding you should know what you're doing. HP and Compaq have each been through mergers a number of times now, but as they settle down together is it likely to be a discordant union or corporate bliss?

When you’ve been married a few times, by the third or fourth wedding you should know what you’re doing. At least the church, cars, flowers and reception will have been taken care of. HP and Compaq have each been through mergers a number of times now, but as they settle down together is it likely to be a discordant union or corporate bliss? Darren Greenwood asks around the congregation.

Last year, Hewlett-Packard supremo Carly Fiorina was looking for happiness when she sought the hand of Michael Capellas of Compaq.

But, as is sometimes the case, a disaffected family member, Walter Hewlett, piped up from the back of the church just as the two had made the aisle, holding up proceedings and making things look touch and go for a while. Despite his protestations, Hewlett was unable to stop the ceremony.

If this is the honeymoon, how are the newlyweds?

Oddly enough, while the original HP was the stronger partner overseas, prenuptial agreement aside, in New Zealand Compaq’s children from earlier unions have not only gained the plum jobs but inherited HP’s lovingly tended waterfront home in Auckland.

The sudden resignation of former HP New Zealand head Barry Hastings, leaving new boss and claimed friend Russell Hewitt for “lifestyle” reasons and his Waiheke olive grove, has meant a near complete takeover by the former Compaq.

Three months after the merger was approved by shareholders, HP New Zealand has completed the integration of both companies right down to the level of deciding which jobs stay and which go, even if a few people may still not have their precise roles settled.

Hewitt says total staff numbers will be about 580, about the same as the two companies’ combined head count when the merger was announced. This is because the company has gained in some areas and lost 40, half through voluntary redundancies.

There have been no compulsory redundancies, Hewitt claims. That’s a happy outcome, given that the parent company was talking about staff cuts of 10% in the early days of the merger.

Company insiders for the most part speak well of the merger. So do resellers, some of whom are apparently getting some input into the new company, and even customers. One former staffer said it was well-planned, particularly on the IT front: as soon as staff got back to their desks after the official merger announcement on May 7 everyone had HP email addresses.

For months Hewitt has been crowing about business “rocking” for the new company. His claims appear to have been vindicated — at least in the PC market — by the latest sales and market share figures from IDC. Its quarterly survey shows HP increased its portion of the PC market from 37% to 42%, while its nearest competitors remain in single figures. HP’s share of the PC server market was 55%, sales increasing 25% on the previous quarter. There’s a small downside: Toshiba regained top spot from Compaq in the notebook market.

HP does not provide quarterly sales figures, but based on the published $580 million annual revenue figures this amounts to about $145 million quarterly. Current sales are “well north” of that, Hewitt says, by a “double-figure percentage”.

Hewitt credits staff, resellers and partners for the solid result, though with potential redundancies in the air one can understand staff going that extra mile.

However, it hasn’t all been plain sailing. Well-established companies have distinct cultures. Hewitt describes Compaq’s as more “country”, meaning it has greater local flexibility and fewer rules sent down from on high. HP, on the other hand, has more procedures in place.

The new HP will exist between the two, with Hewitt saying the recent sales figures have strengthened his hand in telling overseas bosses what works here and what doesn’t.

“There have been some interesting debates with offshore leaders. The good news is, it has to be a pretty compelling directive [from them] to improve these -results. Where we have the international competitiveness we have the ability to debate from a strong position about local conditions. We have lost a few debates about processes, priorities and debates around structure. But they have been extremely flexible when we have put a compelling case.”

Even if the sales figures don’t immediately vindicate the merger, the mechanicals of the process appear to have been handled fairly well, but then both had been through it before. HP New Zealand took over the local subsidiary of US service company CSC last year, and several years previously, Compaq took over Digital.

“There are a lot of Compaq people who have learnt the lessons from Digital,” says IDC analyst Darian Bird. “Get the merger through quickly and get back to business. Make sure you are focused on the customer.”

Former HP commercial channels manager Justin Tye, now part of HP distributor eXeed, says the merger was well thought out.

Its execution might have been faster, he says, but with 600 staff maybe that is asking too much. Tye, who after 15 years with the company felt it was time to go, says it was a big challenge for the senior execs. The merger “was a lot of homework but it showed”, he says.

Another former Compaq staffer, business group manager Andrew Seerden, declined to comment, saying he did not know what was going on at HP as he had been out of the company for two months.

IDC also gives its blessing to the product ranges that will stay and go.

“They have set up a roadmap, and told customers how they would be affected,” says Bird. “They have made sure there is still a roadmap that fits with as many companies as possible.”

Keeping both the Compaq and HP brands in the consumer market for the time being, Bird says, means the new HP will not lose the mindshare of consumers — or retail shelf space. The merger process has also happily kept the company in the public eye.

In the corporate field, says Bird, some customers did hold back, waiting to see how the merger proceeded, particularly when rival firms marketed to increase their anxiety. But now these businesses have seen the merger proceeding well they have started buying HP again, he says.

Sidebars

An orderly transition, for the most part

Keeping 'em happy

Services the next battleground

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