HP Enters Next Stage

After eight months of rancorous fighting to win approval for its merger with Compaq Computer, HP is now faced with holding together its channel as it strives to deliver on promises made during its proxy battle with dissident HP director Walter Hewlett.

"I'm glad we can now move forward," said John Sheaffer, CEO of Sysix Technologies, Westmont, Ill. "If the judge would have overturned the proxy vote and blocked the merger, it would have created a whirlwind."

As HP last week disclosed its post-merger channel management team and this week prepares to unveil its product road map, the vendor has now entered its most difficult phase, solution providers said.

"The product road map has to be defined, and [they have defendable positions," said Don McDowell, vice president of server solutions at Forsythe Solutions, Skokie, Ill. "If they are going to keep [the Compaq ProLiant [server, they have to say, 'This is why we are keeping ProLiant.' . . . On the flip side, they have to have some migration and protection plan for those products that will be discontinued."

HP Chairman and CEO Carly Fiorina and President Michael Capellas will begin to address those issues at a Tuesday morning press conference in Cupertino, Calif.

Last week, a Delaware Chancery Court judge ruled in HP's favor, dismissing all charges brought by Hewlett seeking to block the merger. Hewlett said he would neither appeal the ruling nor challenge the March 19 proxy vote approving the merger.

But now HP must focus on execution.

Fiorina has said that following the merger, HP will be the market leader in enterprise storage, Unix and Windows servers, PCs, management software, and printing and imaging. HP's IT services unit will be No. 3 in the market with 65,000 service professionals.

Capellas last week raised questions about the new company's commitment to HP's Unix HP-UX. "You're going to see Linux and Windows absolutely eviscerate the midrange Unix market," he said.

HP also must convince solution providers that a dual-channel hierarchy will work. HP will come out of the gate with two separate North American channel groups,one for velocity products such as PCs and other access devices, and a second for enterprise products.

HP channel chief Kevin Gilroy was named commercial channel head in the new HP Personal Systems Group. Compaq channel chief Dan Vertrees will lead enterprise channel partners in the new HP Enterprise Systems Group.

Both Vertrees and Gilroy declined to comment.

Solution providers are concerned that the two channel groups will work in parallel, creating a two-headed monster instead of a cohesive organization. Last week, for example, some solution providers said they were asked to fill out separate questionnaires prior to briefings with respective channel organizations.

Solution providers are anxious to learn how HP's Hard Deck program will be reconciled with Compaq's named-accounts program. Hard Deck listed about 900 named accounts that HP will target directly, while Compaq named some 400.

ELIZABETH MONTALBANO and AMY ROGERS contributed to this story.