News Review: Merger of HP and Compaq
HP have become a profitable company, having successfully swallowed up Compaq. I never thought they could do it. Carley deserves her pay packet.
I never thought they could make it. The merger of Compaq and HP will go down as a textbook case of how to do it properly.
This is a significant achievement, not least because of my earlier comments in September 2001 when the merger was first announced (see Death of Compaq, as HP tries to swallow up the company that never understood mergers. I suspect a pro-Intel conspiracy...). All in all, the transition has been remarkable. Unlike the amalgamation of Compaq with Digital Equipment (DEC) and Tandem, almost all of the HP people I have spoken to in the last year have identified themselves clearly with the new company, not their old one.
True, there has been some culling of top-level management. It was interesting how the ex-Compaq members of the board have gradually been culled, found other employment, or left to spend more time with their families. This is bound to happen after a significant shake-up.
Casualties and Victories in War
There have been some difficult decisions to take. Although TRU64 is still available, the real message is to wait for HP-UX 11i. Unfortunately, this has been delayed, yet again, and now not expected until the second half of 2005. Then, just to put more confusion in the line, the EV79 chip set has now been marked officially "dead". So although the next release of HP-UX promises much - TRU64-type Clustering, new Filesystem, Itanium and PA-RISC support - it is still a long way from delivering.
The so-called "New HP" have a lot of legacy technology, and their customers deserve to have some sort of upgrade path. If they don't, the customers will go to the likes of IBM or Sun.
But, on the other hand, HP have posted a 10% increase in Sales ending October. Not bad for a company which has to take a hit on consolidation costs as well. Don't forget, it's difficult to get your sales people to focus if they are part of a re-organisation. So, in this economic climate, getting that sort of motivation out of key people - in all the main divisions of the company - is a tribute to the Mangement style of HP. And that can only come from the CEO down.
How did they do it ?
Frankly, if I really understood how HP have managed this success, I would probably be in a different job. However, from my observer's limited perspective, there are a number of key elements in the takeover success.
Planning: I was told that as many as 40 people were involved in planning the takeover before the ink was even dry. Sworn to secrecy, this "skunk works" developed everything - Marketing Strategy, Product Choice, Sales Territories, Communications, Investor relations - the lot. The full implications of this takeover were being realised long before the final votes from the Compaq and HP boards and investors. That's forward planning.
Focus on hard decisions: There were difficult ones. The question of Storage choice was fudged a bit by the early sales force. But other than that, there were some deliberate choices. Out went the old HP-line of PCs, in came the iPAQ. The HP-UX roadmap was clearly defined. And Compaq Professional Services came into their own. It's not easy to take such hard decisons - especially bearing in mind that thousands of people's jobs are involved. But it makes a merger work.
Culture Change: One very interesting point was the way in which the "NEW HP" message came across. This was very crucial. It meant that the new joiners (and we all knew that HP was the dominant partner) had an identifiable culture they could contribute to. Cultural change is often forgotten as a key element of mergers.
Communications: This was nothing short of astounding. The day the merger was finalised, the company I was working at received a visit from their (ex-Compaq) Account Manager, introducing themselves as the New HP Account Manager. Territories had been divided up, Accounts allocated, and a smooth transition planned. Literature was handed to customers, white papers and roadmaps were already printed and distributed.
The next challange: I had previously thought that Computer Associates were the slickest team for aquisitions, but I've changed my mind. The next point was even more astounding. Having inked the Compaq deal, Carly casually mentioned that this was not the last. In other words, the objective of climbing this mountain was to get to another one. As people sometimes say, if you aim High, you might get there. If you aim Higher, you will certainly do so.
Reviewed by Dennis Adams in December 2003