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Compaq: We Learned Our Merger Lesson With DEC

If approved, the merger between Hewlett-Packard and Compaq Computer will draw upon lessons from earlier mergers, including those from Compaq's less-than-successful integration of Digital Equipment Corp. four years ago, according to the Compaq official heading the integration talks.

In a QandA session following a teleconference Monday, Jeff Clarke, CFO of Compaq and the head of Compaq's half of the integration team, said Compaq learned much from the Digital Equipment Corp (DEC) acquisition that will help smooth the coming merger.

More specifically, Clarke, who came to Compaq from DEC, said when Compaq bought DEC, the company was not clear enough on several key pillars of a successful integration.

First, Compaq was not clear in terms of product road maps, and as such was not consistent in communicating road map information to employees, said Clarke.

Second, when Compaq originally set up its new combined organization and go-to-market structures, there were many compromises made as a result of the new relationship that later were changed, Clark said.

Third, there was no full accountability related to the financial plans for the new structure that resulted from the DEC acquisition, Clarke said.

When Michael Capellas, current chairman and CEO of Compaq, joined the vendor as CIO about a year after the DEC acquisition, he added a strong perspective to many of the more challenging parts of the merger, specifically in relation to the long-term actions vs. the short-term actions, Clarke said. "When he became COO and then CEO, [he very quickly made some of the hard calls on the product road maps and on the financial accountability that we had failed to do earlier."

Clarke, along with Webb McKinney, president of HP's Business Customer Organization and the head of HP's side of the integration, also discussed progress of the integration, specifically plans to unveil product road maps shortly after the merger is approved. However, much of what was said had been previously discussed by officials of the two companies.

In related news, the bard of directors of Interex, the International Association of HP Computing Professionals, on Monday said the organization plans to vote its block of HP stock in favor of the merger.

"We believe our members will enjoy the inherent benefits of a marriage between HP and Compaq," said Bob Combs, chairman of the Interex board, in a statement. "The merger of these two industry pioneers will give Interex members broader access to leading technology, R and D programs, marketing, and service and support, enabling them to strengthen their computing platforms."

A spokesperson for the organization was unable to confirm the number of HP shares Interex controls.

The Interex vote of confidence only partially makes up for recent decisions by institutional investors to vote against the merger.

The California Public Employees' Retirement System, or Calpers, the country's largest pension fund, on Friday said it will vote its 7.6 million HP shares and 6.5 million Compaq shares against the merger.

Meanwhile, the Ontario Teacher's Pension Plan Board, which holds nearly 1.5 million shares of HP stock, said recently it would vote against the deal. In a statement, the organization said, "The OTPPB is of the opinion that the proposed merger lacks strategic merit and increases Hewlett-Packard's exposure to a troubled commodity PC hardware business. The proposed merger will significantly dilute Hewlett-Packard's shareholder's interests in a profitable imaging and printing business. The OTPPB is of the opinion that the financial impact on the Hewlett- Packard shareholders will be negative and so the OTPPB votes against the planned deal."

Craig Zarley contributed to this story.

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