HP, Compaq integration 'going smoothly'

The incoming president of Hewlett-Packard says the integration of the company with Compaq Computer is "going smoothly", with …

The incoming president of Hewlett-Packard says the integration of the company with Compaq Computer is "going smoothly", with employees - weary of an eight-month merger battle - eager to put aside their differences.

"After eight months of this, people are just ready to get on with it," Mr Michael Capellas, chief executive of Compaq, who will become the number two executive at Hewlett-Packard next Tuesday, when the companies close the biggest merger in technology history, told investors.

"We are much, much farther along than I think people realise," with three-year product road maps ready to go and managers of the top 100 accounts named, he said. "I have not seen any particular turf wars," between himself and Hewlett-Packard chief executive Ms Carly Fiorina or divisions slated to join, arguing that specialists in the same field generally saw eye to eye.

Significant job cuts are expected at the Irish operations of Hewlett-Packard and Compaq although people close to the companies have stated that they do not have many overlapping operations in the Republic.

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The companies have stated that up to 10 per cent of their combined workforce of 150,000 across 160 countries might not be required. While that suggests that 400 of the company's 4,000 Irish employees might be vulnerable, the number at risk is thought to be smaller than that.

A formal disclosure related to the merger is expected next Tuesday. It is not clear whether that statement will clarify the Irish situation.

Ratings agency Fitch, which yesterday granted the new company an A rating, anticipates a majority of the necessary cost savings will occur in the hardware segment of the business.

Markets have been pessimistic about the $18 billion (€19.7 billion) deal, nearly foiled by a cut-throat proxy battle and then a failed lawsuit by family heir Mr Walter Hewlett that had aimed to overturn Hewlett-Packard's shareholder vote.

Hewlett-Packard's stock is down 26 per cent, compared with a 16 per cent decline at rival IBM, since the deal was announced on September 3rd last. However, Hewlett-Packard shares rose 1.36 per cent, or 23 cents, to $17.09 on Thursday, bucking the losing trend in the wider technology market.

Mr Capellas said he saw room for more cost synergies than planned - and without increasing planned job cuts. However, he declined to confirm early merger team projections, quoted in court two weeks ago that savings might be as high as $3.4 billion to $3.9 billion, rather than the $2 billion to $2.5 billion public target.

The business climate was "bumping along the bottom" but there were small signs of improvement, including corporate interest in new, small technology projects, and a lot of pent-up demand, he said, speaking at a conference hosted by Merrill Lynch. "You sort of get an intuitive feel that you are starting to see just a little bit of a pick-up in the corporate side," he said.

With more than $75 billion in revenues, the enlarged Hewlett-Packard will be the second-largest IT firm, although nearly a quarter of revenues will be derived from the currently unprofitable PC segment.