A Quick Look at HewlettPackard

1

• A Quick Look at Hewlett-Packard
• and
• The New HP
• Jim McEachron
• Emgt 314

2
HP - Background

• Founded in 1938 by Bill Hewlett and Dave Packard
  With 538 Working Capital
• General Philosophy Has Been to Charge a Premium
  For Leading Edge Technology
• By 2000, Had Grown to a 48.8 B Business (58
  International) w/ 85,500 Employees
• Products Are Computing and Imaging
  Solutions/Services For Home and Business,
  Concentrating on Advanced Appliances, E-Services,
  and Infrastructure
• Revenues and Earnings Reported In Three Business
  Segments
• Imaging and Printing Systems
• Monochrome/color laser and inkjet printers,
  copiers, scanners, all-in-one devices, personal
  copiers and fax machines, wide and large format
  printers, print servers, network-management
  software, networking solutions, digital
  photography products, imaging and printing
  supplies, imaging/software solutions, and related
  consulting services
• Computing Systems
• Wide range of computing systems for enterprise,
  commercial, and consumer markets mission
  critical systems and software to personal
  computers for business and home UNIX and PC
  servers, desktop and laptop computers,
  workstations, software, and storage equipment.
• IT Services
• Consulting, education, design and installation
  services, on-going support and maintenance,
  mission-critical support, outsourcing and
  utility-computing capabilities Also offers
  leasing, automatic technology-refreshment
  services, solution financing, and venture
  financing.

Source Fisonline.com and HP Web page
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HP Background (Cont)

• On Sept 3, 2001, HP Announced a Proposed Merger
  with Compaq Computer Corp.
• Compaq
• In 2001, Lost 307 M on Sales of 33.5 B
• Had 78,200 Employees
• Principal Business Lines are PCs, Servers, and
  Storage Devices
• Significant Shareholders Opposed the Merger,
  Publicly Campaigning to Kill It
• Main Objections Were
• (1) Could Slow Growth in HPs Profitable
  Printer Business While Taking on a Zero Growth PC
  Business (2) Would Require 15,000 Layoffs and
  (3) Expected Integration Risk/Cost Would Cause
  4-7 Loss In Combined Revenue
• Proxy Fight Resulted in Shareholder Approval of
  the Merger 3 May 2002
• 0.6325 HP Shares For Each Compaq Share

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HP (Pre-Merger) Financials
Source HP 2001 Annual Report
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HP Current Status

• Combined Company Has 77.8 B in Revenue and
  145,000 Employees World Wide
• CEO is Carly Fiorina President is Michael
  Capellas (Former Compaq CEO)
• Currently Working to Consolidate the Merger
• Eliminating Redundancies Among 85,000 Products
• Achieving 3 B Cost Reduction (1.5 B from Buyout
  and Layoff of 15,000 Employees)
• Handing Out 55 M in Retention Bonuses to Keep
  Key Personnel
• Figuring Out What To Do About the Stagnating PC
  Market
• The New HP Has Leadership Position In a Number
  of Its Markets

Source Business Week, 18 Mar 2002 (p.62-63)
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Future Plans

• Offer Corporations the Capability to Print Large
  Off-Set Quality Jobs on Printers Tied to the
  Corporate Information Grid at Lower Cost (200 M
  in Annual Profits by 2004)
• Only 4 of Large Corporate Printing Jobs are
  Currently Done on HP-type Printers
• 1 B Purchase of Indigo Tech (Makes a High-Speed,
  High Quality Printer)
• Sell Consolidated Products to a Larger Customer
  Base (w/Twice the Sales Staff)
• Streamline PC Supplier Base and Begin Direct
  Marketing PCs (Like Dell)
• Become the Leading Supplier of Access Devices,
  Applications Delivered as Web Services Running on
  Infrastructure Solutions, Windows/UNIX/Linux
  Servers, PCs, Management Software
• Take Advantage of the Growing Market for Linux
  Servers With New Itanium Chip (Co-Developed with
  Intel Corp.)

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Observations

• HP Offers a Bewildering Array of High Tech
  Products and Services
• These Products and Services Are Sold Through Many
  Channels and International Subsidiaries
• How Do You Control Costs In Such a Fragmented
  Organization?
• HP Used to Have the Luxury of Making a Profit
  While Hiding Inefficiency Inside Premium Prices
• HP Should Make a Big Push to Streamline and
  Achieve Best Efficiency
• This is Somewhat of a Culture Change
• Must Be Balanced With Skill Retention, RD
  Investment, and Growth Goals
• Most Critical in the PC Market
• Dont Give Up the Leading Edge Breakthroughs
  Still Command Premiums