UPDATE: HP/COMPAQ - HP unveils product road map

Compaq's Tru64 Unix operating system and Hewlett-Packard's Netserver IA-32 servers, Jornada handhelds and Omnibook notebooks are among the products being phased out as a result of HP's acquisition of Compaq, the companies said today as they unveiled the product road map of the new HP.

Compaq's Tru64 Unix operating system and Hewlett-Packard's Netserver IA-32 servers, Jornada handhelds and Omnibook notebooks are among the products being phased out as a result of HP's acquisition of Compaq, the companies said today as they unveiled the product road map of the new HP.

"Where there's a tough call, we do what our customers would want us to do," HP chairman and CEO Carly Fiorina said during a press conference in Cupertino, California.

Joined onstage by HP executives including president Michael Capellas, Fiorina reiterated the merger's rationales and goals. HP is now the largest consumer IT company in the world, and the largest IT provider for small and medium businesses, she said.

While the new HP promptly unveiled its product roadmap, details about the 15,000 positions it plans to cut are still pending. HP aims to make the bulk of the cuts within the next six to nine months, Fiorina said. She noted that the company will also be increasing its headcount in some areas, citing imaging and printing, and professional services as two units in which HP may be hiring.

Bob Wayman, chief financial officer at HP, said the company plans to stick to its previously announced projection of 15,000 layoffs.

"We don't believe there will be a need to have layoffs in excess of 15,000 people," he said. Wayman added that HP expected 8000 to 10,000 people to leave as a result of attrition.

HP will now be the master brand for all of the merged companies' products, but the Compaq brand will be kept alive in the PC portfolio.

All of HP's professional desktop and notebook products will migrate to the Compaq brand in the next nine to 12 months, HP said. The HP Vectra line will be phased out, as will HP's Omnibook products. HP's e-pc products will survive and continue being sold under the HP name, the company said.

Compaq's Presario and HP's Pavilion line of consumer PCs will compete side by side in countries in which both are strong, HP said, although only one line will be offered in some regions. HP plans to focus on the two brands' individual strengths, touting Compaq's wireless and home networking features and HP's digital imaging tools.

Compaq's popular iPaq Pocket PC will be renamed the HP iPaq Pocket PC, while HP's own Jornada handheld line will be phased out. The Compaq iPaq Blackberry will be retained, under the HP name.

Compaq's Tru64 Unix operating system will be eliminated in favor of HP's HP-UX, which will incorporate some Tru64 features. HP-UX's larger installed base and broader ISV (independent software vendor) network led to the decision, HP said.

HP still plans to release the next generation of Compaq's Alpha processor, currently used in Tru64 systems, and support these products for several years, said Michael Winkler, executive vice president of worldwide operations at HP, in an interview.

Solving its product puzzle isn't the only problem moving forward for HP, one analyst said. The company will need to devise a clear sales strategy that helps it compete with the low costs achieved by Dell and the services-centered model of IBM.

"What's very important here is that they are the biggest partner for the channel," says Jean Bozman, an analyst at IDC in Mountain View, California. "Still, they are not just going with the channel, or just going with the direct model."

Managing a balance between channel sales and direct sales could be a key differentiator between HP and a pure-play direct seller like Dell, Bozman says.

Also key for HP will be how well they can secure business in the small and medium-sized business markets, Bozman says. That market will be a main focus for HP, Capellas said during the press conference.

Bozman adds that HP made "clean and crisp" decisions with its server product lines. Despite potential hard feelings on the part of some HP employees, the company could phase out HP servers based on Intel's 32-bit processors by year's end, Bozman says.

HP will also try to capitalise on licensing perks that Compaq had with Microsoft Winkler said. Although legal restrictions related to the merger have thus far prevented HP from negotiating new terms with partners, Winkler said personal bonds between Compaq and Microsoft management should help secure competitive deals for HP on software licensing.

"Microsoft through [CEO] Steve Ballmer and HP through Michael Capellas have a great relationship that I believe will carry over into the new company," Winkler said.

Even though Capellas relinquished his position as a CEO, he is likely to stay on as HP president for some time, Winkler said.

"There is no question in my mind that Michael intends to stay for an extended period of time," Winkler said. "I think you will see him stick with it to bring the promises of the merger to fruition."

Fiorina maintained her sense of humour throughout today's press conference, ending with a quip on the future of Compaq-sponsored sports arenas in San Jose, California and Houston.

"It's not going to be called the Fiorina," she said of San Jose's Compaq Centre. "It is going to be the HP Pavilion." Fiorina said Houston's Compaq Centre will also likely be named the Pavilion – also a brand of HP's PC line.

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