Reformatted so I could read it.

On Fri, 23 Aug 2002 08:36:26 -0400, Rao, Raghu <[log in to unmask]> wrote:

>By Ian Fried
>Staff Writer, CNET News.com
>August 22, 2002, 2:30 PM PT
>
>As Hewlett-Packard and Compaq Computer were preparing to merge, both
companies were in separate talks over a multimillion-dollar PC and server
contract. And both were on the verge of losing the deal.
>
>With the merger drawing closer to completion, and uncertainty as to which
HP and Compaq product lines would survive, theater chain Regal
Entertainment had just about decided to hand the contract to IBM.
>
>But HP and Compaq came up with a combined pitch May 7, the day the new
Hewlett-Packard was launched. Within 48 hours, the new HP had stolen the
contract back from Big Blue.
>
>That's the kind of last-minute sales daring Jim Milton, the HP executive
charged with heading the company's U.S. sales force, says reflects the
personality of the new Hewlett-Packard. An indication of just how well HP
has done in this regard will come Tuesday, when the company delivers its
first earnings report as a combined entity.
>
>Since the merger was announced nearly a year ago, HP has had to fight the
historical trend in which a newly merged company loses ground following the
deal. It also had to minimize the impact of the tumult surrounding the
proposed merger, in which potential customers, like Regal, wondered whether
the deal would go through or blow up, leaving behind two weakened
companies.
>
>To be sure, HP and Compaq have lost market share in PCs, servers and other
key areas, and competitors say they've been able to poach important
customers from the combined company. However, HP executives say that a
rapid product line integration and quick corporate reorganization are
starting to show benefits, and the company is winning more contracts than
it's losing.
>
>"We have lost some business, no question, as a result of the uncertainty,"
Milton said in an interview. "Most of that would have been between
September and May 7. On May 7 the uncertainty was eliminated."
>
>Further internal changes will also solidify HP's sales efforts. By the end
of this month, the company hopes to have notified its entire sales force of
what their assignments will be. It also hopes to have finished informing
those who are being laid off. By Nov. 1, the start of HP's new fiscal year,
the company aims to have unified the compensation system for its sales
force. HP is also coming up on the one-year anniversary--Sept. 3--of its
announcement to acquire Compaq Computer.
>
>How's it going?
>So far, the results of HP's efforts appear mixed. The company has touted a
number of big wins--signed both during the merger planning and after the
buyout was finalized--including deals with the U.S. Postal Service, General
Mills and Microsoft.
>
>But, competitors say HP is losing customers as well. Last week, Dell
executives said their company has seen a 33 percent increase in revenue
since the end of last year in what it dubs "acquisition accounts"--deals
nabbed from rivals such as HP and Compaq.
>
>One area where HP is clearly losing ground is the PC market. In the second
quarter--which covers the final weeks leading up to the merger as well as
the first weeks of the combined company--market researchers say HP saw its
trend of losing share to Dell accelerate, with HP very nearly ceding the
top spot to its direct-selling rival.
>
>"I think it's going to be a close call next quarter," Gartner analyst
Charles Smulders said last month in regard to the Dell-HP struggle.
>
>In servers, HP's market share has stabilized some, but it's still down
substantially from year-ago levels. For the second quarter, the new HP
accounted for 30.5 percent of server units shipped, compared with a
combined 31.4 percent for HP and Compaq in the first quarter and a combined
33.8 percent in the second quarter of 2001.
>
>For his part, Milton has worked quickly to create a sales structure that
can go sell the new HP, even as many are still learning their place within
the merged behemoth.
>
>Thus far, HP has been handling accounts in three main ways. Customers that
in pre-merger days primarily worked with Compaq are still being paired with
their Compaq account managers. Likewise, pre-merger Hewlett-Packard
customers are being handled by their HP managers. In those cases where the
business was split somewhat evenly, account managers are working in tandem.
>
>Making it add up
>The first step was making sure HP didn't lose ground as a result of the
merger--in Milton's words, making sure 1 plus 1 didn't equal 1.5. After
months of uncertainty during which discussing product plans was forbidden,
Milton worked quickly to make sure customers knew what was in store and
felt they were being cared for.
>
>The company had promised to deliver product roadmaps within 30 days of
completing the merger. In most cases, large customers were reading them the
day the new company launched.
>
>Gwen Hahn, who manages HP's account at The Hartford Financial Services
Group, said she was on-site the day the new company launched, making sure
she had roadmaps e-mailed to her from colleagues so she could distribute
them to key IT managers at the East Coast financial institution.
>
>"I think that lent a lot of credibility as far as the customer was
concerned," Hahn said.
>
>Tom Galley, chief technology officer of Regal's CineMedia unit, said the
company had its reservations about dealing with either Compaq or HP prior
to the merger being completed.
>
>"We were maybe more than a bit unsure in the weeks prior to the merger
closing," Galley said. "I think our biggest concern was whether they would
be able to apply their engineering resources. We were concerned they might
be tied up in postmerger activity."
>
>But Galley said a presentation made just after the merger closed changed
his mind. "It became very clear to us that they had done their homework,
that they had the combined expertise."
>
>Jeff Cormier, director of network operations for energy company AES
Intricity, said AES saw little change as it switched from being a Compaq
customer being to a client of the new HP.
>
>"To us, most things have been transparent," said Cormier, whose company
mostly uses Compaq ProLiant servers, products that survived the merger.
>
>Keeping existing customers happy is important, but now HP faces the next
challenge, convincing those customers, and others, to give more business to
the combined company.
>
>"How do we make sure the customer sees that one plus one is greater than
two?" Milton said. "We've already shown that one plus one is equal to two."
>
>While HP got an early start on this score with some of its largest
customers and a few new ones, there's still much work ahead.
>
>One area of keen focus for Milton is making sure that come Nov. 1 the
company has integrated the systems by which it compensates its sales force.
>
>"It's simple, but it's an area you cannot mess up," Milton said. In the
meantime, HP has put in place programs to make sure employees of pre-merger
HP who help sell Compaq gear are being properly compensated, and vice-
versa.
>
>Smooth sailing?
>Andy Levick, who managed the Walt Disney World account for Compaq and now
manages it for the new HP, said that given all the opposition to the merger
that he'd heard about on the pre-merger HP side, he's surprised how
smoothly things have gone.
>
>"Everybody is ready to get along and play together quite nicely," Levick
said.
>
>Another big issue HP will have to tackle is how to juggle its direct and
indirect sales efforts. While Compaq had already been moving aggressively
to take business direct, HP had been more measured. Amid dissatisfaction
among its resellers, HP last year instituted a policy known as the "hard
deck" in which the company designated several hundred large accounts that
its direct sales force would target, while all smaller accounts would be
left for resellers.
>
>HP now plans to eliminate the hard deck for some product categories, such
as PCs, Intel-based servers and printing and imaging gear.
>
>While many resellers are not thrilled with the increased direct
competition, it was inevitable. All in all, many resellers say they are
largely pleased with the level of communication from the company.
>
>"They are working, I would think, quite diligently," said Mark Romanowski,
senior vice president at reseller AMC. "They are trying to communicate as
much as possible...The problem is not everyone has all the answers yet."
>
>Milton said that's changing.
>
>HP, which has assigned responsibilities only to managers so far, should be
reaching the rest of the sales ranks this month. "By the end of August,
Milton said, "everyone will know what their go-forward plan is."

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