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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: hlpinout who wrote (95628)	3/3/2002 1:09:18 PM
From: Elwood P. Dowd	Read Replies (1) \| Respond to of 97611

Integration Is on Target by: iamlongcpq (47/M/boston, MA) 03/03/02 12:32 pm Msg: 275091 of 275092 Hewlett-Packard's McKinney Says Compaq Integration Is on Target By Cesca Antonelli Palo Alto, California, March 3 (Bloomberg) -- Hewlett-Packard Co.'s Webb McKinney, Compaq Computer Corp. Chief Financial Officer Jeff Clarke and the 600 people who work for them have spent 5,000 hours working on a project that may never see the light of day. McKinney, who's co-managing plans for the computer makers' integration, is counting on investor approval of Hewlett-Packard's proposed $21.9 billion purchase of Compaq for his work to pay off. In the past seven months, his team has worked on everything from getting all 145,000 employees onto one e-mail system to making sure big clients such as FedEx Corp. know who their new sales teams are. The Hewlett-Packard vice president said he ``chooses not to think about'' the consequences of a victory by dissident director Walter Hewlett, who is soliciting proxies to block the deal. Hewlett has made integration a key point of his opposition, saying that weaving the businesses and cultures may be too difficult. As he lobbies investors against the purchase, Hewlett has cited other acquisitions that have failed to produce the intended results, including Compaq's 1998 purchase of Digital Equipment Corp. McKinney disputes that comparison, saying that Hewlett- Packard is planning at least a year of transition as the companies combine. ``We can, with a lot of confidence, say that we have done our homework here,'' McKinney said in an interview on Friday. ``We've done everything imaginable.'' `Compaq's Downfall' Walter Hewlett and other founding family members plan to vote the 18 percent of the shares they control against the deal, and Hewlett has proposed alternate plans for the computer maker if the purchase falls through, including one to replace Chief Executive Carly Fiorina. McKinney has met with some investors and proxy adviser Institutional Shareholder Services as Fiorina presses for enough support to win a March 19 vote. ISS, which analysts say could sway about 20 percent of investors, will issue its report Tuesday after U.S. markets close, the adviser said in an e-mailed statement. Pulling off any acquisition is tricky, analysts say. Integrating new people, products and services into a different corporate culture presents challenges that some companies don't recover from, and the purchase prices can crimp profit for months. In addition, the cost reductions and improved efficiencies expected before a deal often don't materialize or come with unpredictable expenses that take years to overcome, analysts and investors say. ``That was Compaq's downfall,'' said Jerry Dodson, president of Hewlett-Packard shareholder Parnassus Investments, referring to Compaq's purchases of Tandem Computers Inc. and Digital. Convincing Investors The companies have plenty of work to do to convince investors they can combine and start to increase sales as one company. Walter Hewlett says the deal will make Hewlett-Packard too dependent on low-profit personal computers and won't augment the company's industry-leading printer unit, its most profitable business. McKinney and other managers have to prove they can overhaul the PC business to compete with Dell Computer Corp. and at the same time expand the services arm to rival International Business Machines Corp. He and Compaq's Clarke have agreed to spend at least a year more just managing the integration and ensuring that Hewlett- Packard slashes $2.5 billion in costs and 15,000 workers from their combined operations. ``The biggest challenge is, and will continue to be, the planning of and ultimately accomplishing a successful execution,'' Chief Financial Officer Bob Wayman said in a Feb. 13 interview. Smaller Variations As for day-to-day procedures, McKinney said the computer makers aren't that different. His team had consultants interview 150 managers and set up focus groups with other employees to learn about how they see their company's values and their perceptions of the other firm. ``We have not seen any significant differences in terms of values or objectives,'' McKinney said. The variations come in smaller places, he said. Hewlett- Packard workers leave voice message on urgent topics, while Compaq employees favor e-mail. Hewlett-Packard officials spend more time making sure they reach the right decision, and Compaq decides quickly and then sometimes has to change later. McKinney said his group's planned solution includes creating a written toolkit for managers on what decisions should be made more quickly, and how to make sure employees know which communication system to use to make important points. Still, all his work could come to nothing in about two weeks, if Fiorina doesn't win over enough shareholders. Then he'll have to tackle another task: getting things back to normal. ``I worked very hard to recruit all these people (to the integration team), I'll work very hard to help smooth the transitions back into their businesses,'' he said. ``But there's no need to think about that now.''