Managing HP-Compaq Merger

When HP decided to merge with Compaq, I was among those skeptical of the prospects of the merged entity. The history of big mergers in the computer industry had not been encouraging. So, it was with interest that I read this story in the WSJ which said that “elaborate planning is keeping the union on target”:

With an elaborate playbook of action plans and time tables, H-P Chief Executive Carly Fiorina has managed to succeed at the first chapter of the biggest high-tech merger ever: putting the pieces together. A chorus of critics predicted the deal would become stalled, like so many tech mergers before it, in a mess of technical and personal tangles.

Instead, using a methodical approach put into action months before the deal closed, Ms. Fiorina formed an elite team that studied past tech mergers, mapped out the merger’s most important tasks and then checked regularly whether key projects were on schedule.

H-P’s integration crew learned, for example, that during Compaq’s merger with Digital, some server computers slated for elimination were never killed off. In contrast, H-P executives quickly decided what to ditch and every week pored over progress charts with red, green and yellow markers to review how each product exit was proceeding. Red and yellow markers indicated a task was troubled; green signaled a task going well.

Now, just a year after the merger closed, H-P has shed numerous duplicate product lines and shuttered dozens of facilities. By last October, it had cut well over 12,000 staff — more than the 10,000 targeted for that date — from its combined 150,000 employees.

And by early this year, after just nine months as a combined company, H-P was approaching $3 billion in savings from layoffs, office closures and consolidating its supply chain. Its original target was $2.4 billion in savings in the first year and a half after the deal.

The punchline: “Fiorina says Tom Ridge has lunched with her several times in recent months, seeking ideas on how to merge the far-flung units of his Homeland Security Department.”

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.