HP To Take $3 Billion In Cost Savings From Accelerated Merger Integration

That work will save HP a total of $3 billion next year vs. the projected $2.5 billion in 2004, Fiorina said during an analyst briefing here.

Fiorina said that so far HP has completed its integration goals ahead of schedule and the company would work to continue that trend.

"We are accelerating this because we can," she said. "We are getting the whole $3 billion [in savings in 2003 by completing the merger by the end of the fiscal year."

However, Fiorina did not upwardly revise 2003 revenue projections, as expected by some in the industry.

"In terms of what we are seeing in 2003, we don't see the economy [increasing in a robust way," Fiorina said. HP is expecting IT spending to increase by 2 percent to 4 percent next year, accelerating as the year progresses, she said.

"I would describe the economy as stable but not accelerating," Fiorina added.

Still, Fiorina noted that HP will continue to spend $4 billion in research and development but that spending in this area will be "targeted and focused."

As HP works to continue its integration efforts, Fiorina said reporting structures will change slightly.

Mike Winkler, who had been leading HP's direct-sales operations, will move to executive vice president and chief marketing officer. He will oversee marketing spending of $3 billion per year, Fiorina said.

Jeff Clarke, who was working with Webb McKinney on the HP merger integration, will take over supply chain operations as executive vice president of supply chain and customer operations. McKinney will continue to focus on merger operations as executive vice president of integration and organization effectiveness.

Fiorina said HP's project strategy will focus on modularity.

For example, Fiorina said blade servers will be an emphasized product. HP customers have said storage investments are only utilized at 20 percent of capacity, she said, although once they use up storage capacity they plan to invest in more capacity at 20 percent per year.

"A great deal of customer IT investment is underutilized today," she said. "Part of what we see customers doing now is trying to get more utility out of their investments before they invest more."

Fiorina sees blade servers as a key product because they lower the cost of customer integration and allow customers to buy additional capacity over time.

The company will continue to support Windows, Linux and Unix and will focus on helping IT officials manage the different platforms effectively.

"We are betting on heterogeneity and interoperability," she said, adding that HP also will put an emphasis on virtual systems across servers, storage and utility at the data center level.

Fiorina said that in its services division, HP has increased its partnership activities with integrators Accenture, Deloitte Consulting, Cap Gemini Ernst and Young and Bearing Point, by 35 percent this year. She said those integrators are also selling 75 percent more HP products than last year.

Fiorina said HP will continue to hone its direct strategy but will also focus on its recently unified PartnerOne program for resellers and integrators.

"We are looking at strengthening both direct and channel models that improve our go-to-market reach," Fiorina said.