IT cos scramble for P&G-Gillette gamble

Franklin Paul

NEW YORK: Technology companies may be scrambling to offer new computers, software and services to merger partners Procter & Gamble Co. and Gillette Co., but Hewlett-Packard Co. already has a head start, analysts said.

The $57 billion deal brings together two of the world's biggest producers of household goods ranging from Pampers diapers to Duracell batteries.

For technology companies, the deal also creates a need to connect some 130,000 workers and a vast supply chain -- an area ripe for offering computers, services and telecommunications gear.

HP already has a foot in the door at P&G, after its 2003 win of a 10-year, $3 billion contract to run P&G's entire internal technology operations, including its data centers, desktop computers and software programs.

"We should be watching to see how much new business HP picks up from the merger," said Gartner Group analyst Martin Reynolds. "It will be an acid test of customer satisfaction for HP."

HP may have the opportunity to renegotiate its agreement to include services that penetrate deeper into the new, larger P&G. An HP spokesman said it is too soon to comment on its plans.

Gartner's Reynolds said IBM and Accenture Ltd are likely to try to get new business.

"In a merger frequently you have IT (information technology) systems that have to be pulled together, and that often opens up a services opportunity," said IBM spokesman John Bukovinsky.

Representatives for both Procter & Gamble and Gillette declined to comment about their technology plans.

Competition to provide additional telecommunications services will heat up once the combined company decides what it needs, analyst Lisa Pierce of Forrester said.

"If it turns out that P&G and Gillette both buy services from the same provider, P&G can go in and try to renegotiate the deal. The most likely winners are those providers that service both companies," she said.

Big, consumer-focused companies easily spend more than $10 million a year -- and up to $30 million -- on communications services, she said, to manage customers' phone calls, operate elaborate Web sites, and maintain extensive corporate voice and data networks.

The agreement could also be a boon for radio frequency identification, or RFID, a technology embraced by Gillette, HP and retailer Wal-Mart, which lets businesses track the movement of inventory and goods.

Companies that make the RFID tags or software related to them include IBM, Microsoft Corp., Texas Instruments Inc., and Zebra Technologies Corp.

(Additional reporting by Daniel Sorid in San Francisco and Jessica Wohl and Nicole Volpe in New York)