HP-Compaq gets into new management restructuring mode

The realities of a combined Hewlett-Packard-Compaq operation are surfacing

with a steady stream of announcements of how the combined operation will be

functioning and managed.

The biggest moves, so far, involve the decision to drop the Compaq brand name

in many key product areas, including PCs and naming the heads of the PC and

server groups that have combined revenues of $65 billion!

Duane Zitzner, HP's current head of server operations will be replaced by

Compaq's Peter Blackmore, Compaq's executive vice president of sales and

services. Zitzner said the $23 billion server business needs a top marketing and

sales expert to flourish. "We have great technology today. He knows a

gazillion times more about that than I'll ever know."

Blackmore's first project will be to market the new mid-range Unix servers HP

announced this week. HP's rp8400 can take up to 16 microprocessors and lists for

$124,000 with two CPUs. The machine runs on the HP-UX Unix operating system and

uses the company's latest PA-RISC 8700 microprocessor.

HP's announcement comes a week after IBM released a new p660 mid-ranger

server. Next week, Sun is expected to launch a new machine in this class based

on the UltraSparc-III Zitzner, meanwhile, will take on the combined PC business,

which had sales of $29 billion during the two companies' most recent fiscal

year.

Zitzner built HP's personal computer business from almost nothing into the

third largest supplier worldwide. The unit will challenge Dell Computer for the

No. 1 ranking in the industry.

HP will face a monumental challenge in assimilating Compaq's PC business,

especially without the benefit of the Compaq brand name, which HP intends to

drop.

Also, the PC group faces an internal priority problem as HP CEO Carly Fiorina

has said that the corporate, high-end computer and services businesses are more

strategically important than the PC business. Without the proper focus and

commitment, competitors like Dell are likely to run away with much of the

HP-Compaq PC business.

On Wall Street, the merger continues to be ill-received. HP shares were up

just 18 cents at $16.20, but Compaq shares fell another 23 cents.

One of the concerns on financial markets is that while both HP and Compaq

have long ago committed themselves to the Intel Itanium chip for their server

platforms, that processor is a long ways from gaining the status of a major

server platform processor.

One indication of how HP plans to view the PC business it is inheriting, is

that these machines are now referred to by HP officials as mere "access

devices" as opposed to desktop computer systems. As such, the access

devices fall within a broad range of systems ranging from desktop computers to

handheld computer devices and Web appliances.

Consumers who are not looking for "deep" solution strategies are

likely to find refuge with suppliers that more clearly market PCs for what they

are.

(C) Reuters Limited 2001.