HP Begins Reforming Firm

Putting the drama of an acrimonious proxy fight in the past, Hewlett-Packard Co. on Tuesday began the arduous process of absorbing Compaq Computer Corp. in the computer industry’s biggest merger.

Standing in front of multi-colored panels bearing employee pictures and the words “we are ready,” the company’s top executives said HP and Compaq’s Web sites have been combined and the 150,000 employees have been given “playbooks” explaining the transition.

“Clearly, we are focused on building one strong new company, one strong new team, one strong new culture, and teamwork is going to be a very important aspect of our success,” Chairwoman and Chief Executive Carly Fiorina said at a news conference at an HP facility in Cupertino, Calif.

Fiorina and HP’s new president, former Compaq CEO Michael Capellas, answered one of the biggest questions surrounding the deal by revealing which products will remain and which will be phased out over the next three years.

In the home personal-computer market, HP’s and Compaq’s brands will continue to be sold, but in business-focused desktops and notebooks, Compaq models will replace HP’s. HP’s Jornada hand-held computer is being phased out in favor of Compaq’s iPaq line of mobile devices.

In computer servers that run Web sites and data centers, HP will combine technology contributed by each company, such as Compaq’s high-performance computing capabilities and HP’s system-management software and proprietary operating system.

HP still expects to cut no more than 15,000 jobs over the next two years, with many positions lost through attrition and voluntary severance programs. Layoffs will begin Monday and will be mostly completed within six to nine months, Fiorina said.

HP is retaining its name and headquarters in Palo Alto. It acquired Houston-based Compaq for $19 billion in stock over vigorous opposition from the children of HP’s late co-founders, including former HP director Walter Hewlett.

The deal survived an exceedingly close shareholder vote and the apparent opposition of a large percentage of HP employees.

Many analysts have said they expect Capellas, as the head of daily operations at the company, to bear much of the responsibility of reassuring and motivating uneasy employees.

“It’s what I do, it’s what I love to do, and I take great pride in it,” Capellas said.

Hewlett-Packard shares, which now trade under the HPQ ticker symbol to reflect Compaq’s presence, rose 19 cents to close at $18.41 on the New York Stock Exchange.