HP-Compaq Transition Plans Are Ready

With the HP shareholder vote on March 19 looming, HP Chairman and CEO Carly Fiorina promised last week at HP's analyst meeting here that a combined HP-Compaq will be "executing from day one, rather than deciding" which product lines will stay and which will be eliminated.

Fiorina and her management team detailed the integration process which includes a "post-merger integration team" working alongside consultants from McKinsey and Co., Accenture, PricewaterhouseCoopers and Deloitte Consulting.

Ann Livermore, president of HP's services organization, said a team of about 60 people from both companies mapped the integration plans for the services businesses, which includes outsourcing, consulting and customer support. "We have an aggressive adopt-and-go strategy," she said.

Livermore said cultural integration is going smoothly, describing the two companies as very similar. "If I were to close my eyes at these meetings, I couldn't tell you if it was an HP employee or a Compaq employee speaking," she said.

If successful, the merger would catapult HP to No. 3 in the services arena behind IBM Global Services and EDS. Fiorina said it would create a services business projected to grow at 10 percent to 12 percent.

Last week's meeting came as HP dissident board member Walter Hewlett, who is waging an all-out proxy battle to kill the proposed deal, released information at the 11th hour that HP's compensation committee on Sept. 3 had contemplated two-year pay packages for Fiorina and Compaq Chairman and CEO Michael Capellas estimated at about $70 million and $48 million, respectively.

HP and Compaq said no such employment contracts exist. Fiorina said the pay packages will be closely tied to performance.

Glen Jodoin, vice president of solution provider GreenPages, Kittery, Maine, said the release of the potential compensation packages could lead some observers to question whether "decisions are being clouded" by potential pay packages.

But ultimately, Jodoin said he is seeking closure. "HP doesn't have a whole lot of market share, and Compaq doesn't have a whole lot of focus," he said. "I don't know whether it is good or bad, but I do know we need strong partners."