HP in Deal to Manage P&G;’s Computers

Hewlett-Packard Co. on Tuesday announced a $3-billion deal to manage the computer infrastructure of consumer products giant Procter & Gamble Co., one of HP’s largest technology outsourcing projects to date.

The Palo Alto technology company unveiled the deal as it introduced a corporate strategy it calls “adaptive enterprise,” which is designed to provide its customers with greater flexibility and produce a greater return on their investments in information technology.

On the first anniversary of its merger with Compaq Computer Corp., HP said it will manage P&G;’s corporate computer system and data center operations and run the software the company uses for business functions such as inventory management and payroll. The agreement will cover 160 countries and last for 10 years.

The P&G; deal is particularly sweet for HP, coming at a time when corporate spending on information technology remains sluggish and HP archrivals IBM Corp. and Dell Computer Corp. are hungry for mega-deals.

Analysts say they expect an upturn in IT spending later this year, when more corporations may upgrade their computer systems. With its new strategy focusing on providing flexible computing systems to corporate customers, HP plans to be ready.

“This is the ultimate state of fitness, where literally the information technology that supports a business can react in real time to every single business decision,” Chief Executive Carly Fiorina said during a presentation in San Jose.

But company executives were vague about the specifics. Jeff Clarke, HP’s senior vice president for supply chain and global operations, said the adaptive enterprise initiative likens computing power to electricity or water, because it can be expanded or diminished as needs come and go.

“Think of it as the ability to buy computing as you buy utilities,” he said.

In the first year since the merger -- a $19-billion deal that was in effect an acquisition of Houston-based Compaq -- HP has slashed costs much more quickly than initially expected, Clarke said. Although HP committed to save $2.5 billion in the first 2 1/2 years, it was able to shave $3.1 billion in costs in just nine months, he said.

HP shares on Tuesday rose 53 cents to $17.33 on the New York Stock Exchange.