Day of Decision for HP
HOUSTON -- Workers at Compaq Computer Corp. fancy themselves as belonging to the same breed of shoot-from-the-hip wildcatters who built this Texas oil town.
So it’s no surprise to them that Compaq is regarded as the brash, less refined partner in its proposed $22-billion marriage to Hewlett-Packard Co., the blue-blooded technology company with an impeccable Silicon Valley pedigree.
What does surprise the 63,000 employees here and elsewhere is the portrayal by merger opponents of Compaq as an outdated company that would drag down HP’s fortunes.
That’s not the Compaq they know.
As HP struggles with a high-profile family feud between scion Walter Hewlett and Chief Executive Carly Fiorina, Compaq employees largely are forging ahead. Whichever way Tuesday’s vote of HP shareholders goes, Compaq’s workers said they are ready.
“There’s a general can-do attitude around here,” said Marius Haas, a Compaq vice president in charge of e-commerce systems. “What will happen tomorrow? It doesn’t matter. Bring it on.”
Some workers already have taken second jobs in case the merger goes through and their units are shut down. Others are bracing for the restructuring that inevitably will occur if the union falls apart and Compaq remains a separate company.
“A lot of people have something lined up, just in case,” said Mike Waybourn, who works in Compaq’s manufacturing plant and has a second job in construction. “That way, if we get laid off, we’ll have something to fall back on.”
Compaq executives make no secret of their plans to further reduce costs, regardless of Tuesday’s vote.
“All of us are going to continue to have to become more efficient,” Compaq Chief Executive Michael Capellas said. “The whole industry is going to have to go through another phase of realigning their cost structure. I think we got out ahead of it, but I don’t think anybody’s done. That’s just the nature of what we’ve got ahead of us.”
Turmoil and change are nothing new for the 20-year-old computer company founded in a downtown Houston pie shop. In the last few years, Compaq has undergone two mergers and then faced the worst downturn in the brief history of the computer industry. It laid off 9,500 workers and emerged from a brutal price war with a $785-million loss in 2001.
Each experience taught the company lessons, executives and rank-and-file workers said.
“Compaq is about change,” said Audrey Dozier-Piazza, who has been at Compaq 16 years. “I’m on my third CEO, my 12th office. Everything just continues to get better each time. While I believe in the merger, I believe more in Compaq.”
Its mergers with Tandem Computers and Digital Equipment Corp., for instance, resulted in deep culture clashes when units were integrated. As a result, Compaq and HP already have evaluated which overlapping divisions are the strongest between the two companies. The weaker ones will be axed immediately and their employees laid off--eliminating the messiness of marrying two cultures.
“We learned that you’ve got to integrate faster,” said Michael Winkler, executive vice president of global business units for Compaq. “You have to have a clear product road map on Day 1. We didn’t do that with Digital. We didn’t take action on reducing the head count early enough.”
Regardless of whether the company merges with HP, Compaq executives and workers know they have to do a lot more than cut staff to compete in a tight market against the likes of Dell Computer Corp. and IBM Corp.
About 40% of Compaq’s $34-billion annual revenue comes from PC sales. But because the PC market has deteriorated into a low-profit, low-growth business, Compaq has ventured into greener pastures, including servers, storage machines and services.
The company boasts a 30% share and the No. 1 position in servers that cost less than $25,000, according to figures by market researcher IDC. Last year, it toppled EMC Corp. as the largest supplier of storage devices. And it rang up $7.8 billion in revenue from services last year, up 4% from 2000, despite double-digit drops in the PC and storage markets.
Although these are the markets where Compaq likes to highlight its achievements, it is still saddled with a money-losing PC business that accounted for $587 million in red ink last year. Like it or not, Compaq cannot afford to ditch PCs. Customers that buy servers and other higher-margin products from Compaq often start by ordering PCs and work their way up. So when Compaq lost its No. 1 position in the PC business to Dell last year, the blow was hard felt.
“Compaq’s heritage is as a PC company,” said Martin Reynolds, an analyst with Gartner Inc., a technology consulting firm based in Stamford, Conn. “This is not a component of their business that they can walk away from. They have to fix it. If they don’t, a good chunk of their services business--the part that fixes and maintains the PCs--will fall. They’ll be chased into a niche.”
Capellas said the PC market can be lucrative once it includes gadgets that connect to the Internet such as the iPaq, Compaq’s hand-held computer.
“If you view the business as a simple PC beige-box business, then it’s a pretty stable business,” Capellas said. “If you view it as ... next-generation devices being the reception points of new forms of data with new forms of audio streaming and video streaming, then it’s actually a business that will have at least one more wave and probably more.”
Compaq workers take pride in the company’s ability to react quickly--from painful actions such as shutting down plants to buying companies that it thinks will help it reach new customers. But for employees like Antonio Humphreys, who has worked in the company’s PC unit for two years, it’s that fast pace that drew them to Compaq in the first place.
“My wife and I both work here,” Humphreys said. “Do we think about what would happen if we were to be laid off? Sure. It’s one of the major topics of discussion. But once we get to work, we’ve got a job to do, and we do it.
“I used to work at Shell Oil, and I wanted to work in a much more proactive culture. Oil and gas is stodgy and slow-paced.... This is fast-paced. It’s like being on a bullet train after you’ve been on an oil tanker.”
