Filed by Hewlett-Packard Company Pursuant to Rule 425
Under the Securities Act of 1933
And Deemed Filed Pursuant to Rule 14a-6
Under the Securities Exchange Act of 1934
Subject Company: Compaq Computer Corporation
Commission File No.: 333-73454
This filing relates to a planned merger (the "Merger") between Hewlett-Packard
Company ("HP") and Compaq Computer Corporation ("Compaq") pursuant to the terms
of an Agreement and Plan of Reorganization, dated as of September 4, 2001 (the
"Merger Agreement"), by and among HP, Heloise Merger Corporation and Compaq. The
Merger Agreement is on file with the Securities and Exchange Commission as an
exhibit to the Current Report on Form 8-K, as amended, filed by Hewlett-Packard
Company on September 4, 2001, and is incorporated by reference into this filing.
The following is a transcript for a series of video excerpts from a discussion
session with HP employees led by Carleton S. Fiorina, HP's Chairman of the Board
and Chief Executive Officer. The video excerpts and this transcript are posted
on HP's internal web site.
TOWN HALL TRANSCRIPT
CARLY ANSWERS EMPLOYEES' QUESTIONS ON PROPOSED MERGER WITH COMPAQ
Extended video excerpts and the accompanying transcript of CEO Carly Fiorina's
January 23 Town Hall meeting with employees are available on [HP's internal web
site] as a follow-up to the article, "CARLY ANSWERS HARD QUESTIONS," published
January 29 [on HP's internal web site and filed by HP with the Securities and
Exchange Commission on January 30, 2002 pursuant to Rule 425 under the
Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934].
Read "CARLY ANSWERS HARD QUESTIONS" for complete coverage of the meeting
including a summary of the Q&A session.
Key topics and the approximate running time are listed for each video excerpt.
-> CARLY'S OPENING COMMENTS (13:10)
-> REINVENTION, ORGANIZATION STRUCTURE (6:10)
-> EXECUTING ON OUR STRATEGY, CULTURAL DUE DILIGENCE (5:57)
-> DIVERSITY, WORK/LIFE BALANCE (6:06)
-> DECISION PROCESS, COMMUNICATION (10:15)
-> ROLE OF TECHNOLOGY COUNCIL, CTOS (5:52)
-> RETENTION BONUSES, PC BUSINESS (6:43)
-> LISTENING TO FEEDBACK, LAYOFFS (8:30)
-> SOLUTION SELLING, CULTURAL INTEGRATION (8:43)
-> CUSTOMER FOCUS, INTERNAL DISTRACTION (4:01)
-> EMPLOYEE SUPPORT, LIVING UP TO OUR POTENTIAL (8:04)
The transcript for the video excerpts is below.
------------------------------------------------------------
CARLY: Good morning! How's everybody. Wow! This is theater in the round. Great.
Well, thank you all for coming, first of all, and happy New Year to all of you.
I understand you were carefully selected to be a cross representation of HP and
also to be the kind who would be brave enough to ask all the really hard
questions.
So you need to be brave enough to ask all the really hard questions because if
you don't ask them, then all of your colleagues who were not selected to be here
won't get the answers that they're looking for. So think of it as an obligation
that you have to the rest of your colleagues at HP.
Before I open it up to your questions, though, because what I'd really like to
do is spend most of our time on your questions, I want to kind of go back a
little ways and remind you of two things that I said when I first came to HP.
Now there are lots of things I first said when I came to HP, many of which you
may not remember, which would be okay. But I hope you remember two things in
particular. One was I talked about being on a journey, and the fact that what we
were going through as a company was a journey. And the other thing I talked a
lot about at the time was living up to our potential.
And the reason I'd like to start with both those things is because I think
they're very relevant to our merger with Compaq. This is a company that has been
through many journeys and many cycles of change, if I can call it that. I don't
how many of you know but today is, not today, this month is the 60th anniversary
of the audio oscillator. And think about how far this company has come from the
audio oscillator to the Superdome.
About three years ago, almost three years ago to this month, the HP Board of
Directors made a very important decision which began another cycle of change.
And that very important decision was to spin out Agilent Technologies. Initially
the spin out of Agilent Technologies was a controversial decision. It was a
traumatic decision. But, at the same time that the board decided to spin out
Agilent Technologies, the board also made a couple of other very important
strategic choices.
And for the last two-and-a-half years that I've been here, the board and the
management team have reaffirmed those strategic choices over and over and over.
And I want to go back and remind you of what those were and are because they
define the journey that we're on, and they also indicate or help us understand
that the Compaq merger is the culmination of a process. It's not the beginning
of a process. It's the end of a process in many ways.
So what couple of really important decisions did the board reaffirm three years
ago and reaffirm over and over again? One,
that we have to keep this portfolio together. That keeping imaging and printing
and computing and professional services together is important. We could make
other choices. By the way, every other option that any of our critics have
suggested we've looked at more than once.
And the reason we are so convinced we have to keep this portfolio together is
because we are as a leader in imaging and printing, as the leader in imaging and
printing, we are a category creator; that's how you stay a leader. Others follow
us, but you stay a leader by creating new categories which insure ongoing
top-line and bottom-line growth. If you want to be a leader for the next five
years, the next 10 years, not just the next 12 months, you don't milk
businesses; you invest in them.
And so our growth engines in imaging and printing going forward, just to name
two, are digital imaging and digital publishing.
But importantly, digital imaging requires all the capabilities of this firm. It
requires, yes, the great people in imaging and printing, but it requires the
great people in HP Labs -- it requires software expertise, network management
expertise, computer infrastructure expertise. The reason we can do things in
digital imaging that nobody else can do is because we have the full portfolio of
this company.
Digital publishing is another example. Remember that we [announced the Indigo
acquisition] the same week that we announced the Compaq merger, and digital
publishing is a huge growth opportunity going forward.
But to get at digital publishing -- in addition to print engines and ink and
toner -- you need servers, and storage, and software, and professional services.
Because digital publishing, just like digital imaging, is about content
transformation, not just printing. So we've got to keep the portfolio together.
The second very important decision that we made three years ago and we keep
reaffirming over and over again is we're going to be both a consumer company and
a business company. That it is important to lead in both spaces. And by the way
we're very unique as a technology company in being able to lead in both spaces.
The third choice we made is that we have to participate to lead given the
changes that are going on in the industry, given the changes in our customers
requirements, given our unique capabilities. We believe we have to participate
at that intersection of always-on Internet infrastructure, of intelligent
connected devices and environments, and of useful e-services. And that should be
familiar as well.
And having reaffirmed those three fundamental decisions over and over and over,
and understanding that for example being an always-on Internet infrastructure
has huge implications for us as we think about moving more and more to open
architectures and industry standard-based platforms. It has huge implications
for how we manage networks, the kinds of software capabilities we invest in,
what we need our professional services capabilities to be.
Having reaffirmed those decisions in the last two and half years, and having
considered every alternative, every alternative that our opposition has
suggested -- and a bunch of others they didn't -- the board of directors and
management team of this company are convinced that this is the best alternative
to accelerate our ability to execute on this strategy. It is not a new strategy.
It is the same strategy.
But remember I also talked a lot when I first came here about speed, the
importance of speed. If you have an opportunity to execute on a strategy faster
or slower, which do you pick? Faster. Why? Because this is an industry that is
moving more and more quickly, and our customers' requirements are changing more
and more quickly.
So fundamentally what this merger is about is we can get to the place we have
been aiming towards faster, more effectively, more profitably, as a stronger
company. We can reach the destination faster, more successfully, more
effectively, and more profitably.
That's not to say that this merger doesn't have risks -- it does. That's not to
say that there aren't challenges -- there are. But just because something is
hard doesn't mean it can't be done. Just because something is hard doesn't mean
it shouldn't be done. Frequently when it's hard not everyone will try it, and
that is what leadership in the end is all about. Leadership is all about the
separation of the strong from the less strong. Leadership is all about those
people who have the capability to get something done that not everyone could get
done. And that ultimately is what this company is all about. It's what this
company has always been about.
Now I'm going to give you a two-minute warning because in about two minutes I'm
going to stop talking and then you have to ask all those hard questions, okay?
In this journey that we're on, a journey that is about leadership, a journey
that is about building the strongest
company we can, a journey that is about a recognition that there is no escaping
the need to be competitive in every conceivable way. In this journey that we're
on, we did not ask for a proxy fight; we did not anticipate a proxy fight. But
now that we are engaged in a proxy fight, it is important for us to always set
the record straight because this is too important to our customers, to our
employees, to our shareowners, to have the record be wrong.
And when I say set the record straight, what I mean is when our opposition or
our critics lay out misleading facts about this merger, then we have to correct
those facts. When our opposition attacks the credibility or the process of our
board of directors, we have to set the record straight.
And when our opposition asks shareowners to substitute a single person's
judgment for the judgment of an experienced board of directors and management
team, then the relevant business experience of that individual has to be part of
the fact base.
In the end this is not about any individual. This isn't about me. This isn't
about Walter. This isn't about David. This isn't about an individual. What it is
about is building a company. And the hard work of building a company has to go
on day in, day out, year in, year out. Nobody gets a pass if as a company you're
going to survive, and nobody gets a pass for sure if as a company you're going
to lead. That's what this is about.
We can talk a lot about integration if you'd like. The integration is hard,
challenging, but we can do it and we are executing.
Okay, two minutes are up. It's your turn. Who wants to ask the hard questions,
and trust me, someone has asked it before, so it's okay. Yes. There's a mic
right there because that way people who are in other locations can hear you
better.
[EMPLOYEE Q1]: Hi, Carly. My name is [employee name]. I work in BCO. You talked
about being at the intersection of all the different technologies and being able
to offer all of those technologies to our customer base in the marketplaces. Can
you talk a little bit about reinvention? Two years ago we did reinvention and it
was a major activity within the company. Do you still see the ideals of
reinvention carrying forward with the merger, beyond the merger?
As we have been announcing parts of the organization I have seen more of a
verticalization of three or four major sectors, but I don't see at least
organizationally, and that's just only one
dimension obviously, but I don't see the concepts of an organization that can
take all the products that we can offer to the specific segments of customers.
So how do you see reinvention holding up with the merger?
CARLY: I'm only laughing because I'm getting a lot of head nodding over here.
So first let me say that I know it's frustrating when we have really at this
juncture only one level of the organization announced and a lot of guessing
about everything else. And part of that, a large part of that, is the fact that
we simply are unable to share a lot of information until we are prepared to have
that information be made broadly available publicly, and we can't do that until
we get through the regulatory process.
So, I understand it's frustrating, but to answer your question specifically,
first of all I talked about a journey. I think reinvention is never over. So
it's not like reinvention was an interesting buzzword and now we're going to
forget about it. The reality is that, the reason reinvention is never over is,
it's the same thing I've said all along, the day a company stops [growing] is
the day a company starts to die. The world that we have to compete in is
constantly evolving and changing, and therefore we must as well. And to be a
leading company, the truth is, we have to change in front of the market, not
behind the market.
But specifically to your question, there are a couple of key principles that we
established in reinvention that have served us well and that we are going to
stick to. Principle number one: Total customer experience is important. It's
really important to have good products. It's really important to have leading
technology, but it's not enough. And all of our experience and our data tells us
it's not enough.
And so total customer experience, the fact that we need to understand it, we
need to measure it, we need to hold people accountable for it, and we need to
deliver it, those are things that we will continue to do in the new
organization.
The second principle that was important was that we want to be able to provide
one face to the customer so that we can deliver to the customer the value of
this total portfolio; that principle will be preserved.
Third principle: In addition to being able to have one face to the customer and
understand and deliver a holistic total customer experience, we also need
appropriate specialization. So what that means is when a customer says, you know
what, I really need
to get down and dirty on storage and how this particular product racks up
against this one, we've got to have people who are able to take a deep dive. So
you've got to get the right blend of one face to the customer and
specialization.
The fourth very important principle, or maybe I should call it a habit, is we've
learned, I think, we still have some ways to go, but we've learned how to
collaborate better inside the company. And we've learned that collaboration and
sharing, sharing processes, sharing in some cases organizational capabilities,
is an important principle if you're going to couple one face to the customer,
and leveraging the whole portfolio with specialization.
So specifically what I mean by that is we will have go-to-market organizations
that are hosted in the businesses that you now see described at the top level.
But that doesn't mean they belong to those businesses. We will have a consumer
organization, a business organization, a commercial organization whose job it is
to present one face to the customer. And that capability has to be shared by all
of the businesses.
I guess a fifth principle that we established that we will adhere to is that we
are always seeking to drive decision making as close to the customer as
possible. So that we have people that face the customer every day, whether
they're sales people, or support people, or services people, or technical
specialists, who have the accountability and the authority to respond. Because
that increases our speed and it increases customer satisfaction and total
customer experience. We know that.
So all of those principles are vital, will remain in place, and, so don't assume
that because what you see right now is the top level of an organization
structure, that our go-to-market motions are separate for each of our
organizational units; not the case. I hope that's helpful. I can't lay out the
whole org chart, but I'm trying to be as explicit as I can be.
[EMPLOYEE Q2]: My name is [employee name], I'm with enterprise workforce
development. And five to six months ago you launched, you, we launched, the
make-the-connection communications for our make-the-connection strategy. So can
you speak, Carly, to how the merger helps us execute upon the
make-the-connection strategy.
CARLY: Well, I think, I guess the best way to answer that question is to remind
you of something else I said early on. Remember, I don't know, hopefully some of
you remember me saying this: Acquisitions are tactics not strategy. Remember me
saying that?
Now this is a big hummer tactic. But it is a tactic. And what I mean by that is
acquisitions, mergers, have to be driven by strategy. They can't create
strategy. And so fundamentally, whether it's make-the-connection, or total
customer experience, or planetary computing, or digital publishing, I mean you
name any aspect of our strategy that we have spent literally two-and-a-half
years honing, refining, understanding, what this merger is about is helping us
execute those strategies more effectively. And it is true in make-the-connection
as well.
Now that is not to say that there won't be things that change -- there will be
things that change. There will be things that change. In some cases those things
that change will be initially uncomfortable. Let me give you an example and it's
the old saying, "Every coin has two sides."
We have completed and perhaps some of you participated in it, we've completed,
just completed a process that we call "cultural due diligence." Bear with me,
this is relevant.
Cultural due diligence, a lot of employees have asked: Well, you know, bringing
two cultures together is really important, how are we going to deal with it? And
it is true when you look at mergers that have worked and mergers that have
failed the thing you learn over and over again is you have to deal with cultural
integration with the same discipline that you deal with product line
integration. So we are.
And what cultural due diligence was all about was gathering data that tells us
what's it really like inside HP, and what's it really like inside Compaq. And
culture is about more than core values or corporate objectives. Culture is about
habits and how people get work done, and style, and all of those things.
So, one of the things we found out in cultural due diligence, I thought some of
you might have been engaged in the process because we did about 180 focus groups
of about 1,600 employees, but one of the things we found out is that HP
employees tend to look to the past for guidance. Compaq employees tend to look
to the future.
Another example: HP employees tend to be very process oriented and we make very
thorough decisions but we make them slowly. Compaq people tend to be much less
process oriented. In fact they don't like process in many cases, but they make
decisions much more quickly.
Now if you think about those two examples I just gave, both of those examples
could cause us to kind of fly by each other and
frustrate each other. On the other hand both of those at the other side of the
coin, both of those examples represent opportunities for huge leverage. Because
you know what? Inside HP we also have to look to the future in addition to
looking to our past. And inside HP it's great that we're process oriented, but
we've got to get faster.
So all of that is to say that in addition to a merger being a tactic around
business strategy, I also have thought about this merger as a tactic in cultural
strategy. The same things, the catalyst, the changes we have needed to make
culturally as a company, are changes that will be accelerated by this
combination.
Will our core values stay our core values? Absolutely. They are timeless. I said
that the day I walked in the door, and it will be true for as long as this
company's in existence.
Are our corporate objectives sound? Absolutely. They're common sense. Who
wouldn't want corporate objectives like profit and customers and contribution?
But it is also true we have to get faster. It is true that we also have to look
to the future because the past gives you many lessons, but not all.
So, short answer, does it help us in terms of the connections? Yes. Long answer,
I and the management team and the board would not have undertaken this if we
thought it was a detour. You only undertake it, as challenging as it is, if you
think it is an accelerator on a set of decisions that you've already made and a
set of changes you already know you need to make.
[EMPLOYEE Q3]: Good morning, my name is [employee name]. And my question relates
to culture and what we choose to bring forward on our journey.
HP has a long legacy of recognizing the whole person and providing support for
work/life concerns, and employees have traditionally brought their whole person
to work. I'd like to know your thoughts about these topics and the new company,
and how you would frame them for those of us who are managers or are making HR
policy and programs.
CARLY: Okay, great question.
So one of the things that I believe really deeply is in the power of diversity.
Now why do I start there? I start there because the power of diversity is all
about creating an environment where everyone can bring their whole self to work.
I think it's vital that people bring their whole selves to work, and I base that
on, not on sentiment -- although it's the nice thing to do and the right thing
to do -- but I do it based upon business experience. When you have people who
are engaged totally in what they're doing, engaged mentally, engaged
emotionally, have the foundation of the rest of their lives in a place where it
fits with their work life, who are accepted in the workplace for who they are
based upon their contribution, not based upon their style. When you get that
kind of environment, then you get the best people have to offer.
When you constrain people, when they feel as though they can't reveal all of
themselves, when they feel as though, you know, if I express myself this way,
people won't hear me, so I better kind of fit in. That's when you lose
contribution. And ultimately a company's success is based upon the value of its
contributions of its people, period.
So bringing the whole person to work, what that means with regard to diversity,
and what that means with regard to people feeling as though this is a place that
can handle their work/life balance issues, those are fundamental foundations to
business success, period. Always will be in my mind.
One of the, I don't mean to get too philosophic here, but I think there have
been many lessons in some of the great business myths of our time. We have so
many examples today of where the conventional wisdom and the popular opinion is
wrong. The dot-com boom was the one example where everyone said, it's never
coming to an end. I mean, yes, Ariba is worth more than General Motors. Profit
really doesn't matter anymore. I mean that was the conventional wisdom. It was
all wrong.
Think about the conventional wisdom, the popular view of Enron, think about the
reality. The reason I bring those things up is because those are examples that
feel far afield, but those are examples, I think, of the destructive power of
group think, where everybody starts to think alike. And you don't have enough
people saying, wait a second, why is it this way?
And to me group think can kill a company faster than anything else. And that is
why it's vital that we have diversity in all its forms. Diversity of thought,
diversity of style, diversity in its classic sense, because what we can't do is
become a set of group thinkers.
By the way, the HP Way has never been about group think, although there are some
people who confuse it with group think. The HP Way is not a secret handshake.
It's not about us all doing things the same way.
By the way, imagine the poor people of Compaq. They read some of this stuff and
think, oh my God, what is the HP Way exactly? I mean, do I have to know some
special sign? Do I get a secret ring? What is it?
So I hope I've answered your question. Now the last thing I'll say is about
work/life balance because I think sometimes that gets confused for people, too.
Everyone has their own sense of work/life balance. For some people the balance
point is very different than for other people. My sense of work/life balance may
not be yours. I mean I don't have any right now, but that's a whole different
matter, as my husband frequently reminds me on the rare occasions that he sees
me lately.
And a company has to be able to support all kinds of choices about work/life
balance. But there are consequences to choices. And people have to be able to
deal with that as well. And I think sometimes people confuse work/life balance
to mean I get to make whatever my choice is on work/life balance and there are
no consequences to that choice. And that isn't true either.
So I hope I've answered your question.
[EMPLOYEE Q4]: Hi, I'm [employee name], and I'm in the operating environment
operation for UNIX servers. So I want to bring back up two things that you
mentioned I thought were important. One of them was making our decision based on
the opinion of an individual versus the opinion of a group, and the second is
the cultural differences in how HP performs. I think that's significant because
the Executive Council as a group has made decisions that have disrupted
people's, their opinion of their credibility: the workforce reduction, the span
of control changes, and the salary freezes, all happened in a situation that led
-- I'm speaking now for those in the hall who would say can you say this to
Carly -- said, it made no sense. What do they think they're doing? And therefore
to trust that the decision to merge is a sensible idea is a challenge for people
to trust that.
The second is in talking about the culture that HP is more process oriented and
therefore slow to decide. But the key is the process orientation. I think that
those play together. You've made great strides coming forward here and talking
to us. Each time you do I think you explain a little more about what has been
going on, and it's easier for us to get our hands around it. Specifically the
pay freeze that occurred. The established process was a pay range for a year and
then divide it up over
four opportunities to give people the salary that matched their performance.
That process was disrupted by freezing it three-quarters of the way through.
So the key is communicating that if we are changing our processes, we may not be
able to complete what we've been doing, and I think it's key that you address
some of these issues that will reestablish trust in the executive committee that
it understands the culture of HP as it is, it understands the impact of the
practices that have been implemented, and that it can answer the question: What
about that 25 percent, or in our labs case almost 50 percent, of our employees
who were scheduled for that increase that now know they're not going to get that
and they're still being paid on old pay ranges, and they don't have an answer to
that question? So if you could answer process for the culture within HP and
moving that forward with Compaq.
CARLY: So multi-part question there. And I'm sure you'll remind me if I forget a
piece of it. So let me try and distinguish three things and respond to all
three. First is a decision itself, the quality of that decision. Second is the
process used to reach that decision. And the third is how that decision is
communicated. And I probably ought to include in the second the process used to
reach the decision and implement the decision.
So let me start with the first, and the specific examples you gave were: salary
freezes, workforce reduction. Very difficult decisions, decisions that required
sacrifice on the part of all of our employees. And the right decisions to have
made. Would we have predicted that we would be in the most dramatic technology
downturn in 40 years? No. Do we have an obligation to protect the profitability
of this company during a downturn? Yes. Do we have an obligation to do those
things to protect as many people as possible? Yes.
So I will not apologize for having to make a decision to freeze salaries or to
cut workforce. I regret we had to make them. I know they represent hardship. We
made the workforce-reduction decision as a last resort not a first resort, which
is why before we got to that point in August we went through salary freezes and
voluntary pay cuts and everything else to try and avoid that. But in the end
there was no escaping the reality that our cost structures were not competitive.
There are times, one of the phrases that is a favorite around here that I
actually like is: One size does not fit all. And there are times when decisions
need to be made with hundreds of people. And there are times when decisions need
to be made with tens of people. There is a time and a place for
command-and-control decisions, hopefully rarely. But when a decision is very
sensitive, when it needs to be made quickly, when it needs to be made with the
utmost security because for it to get out would be damaging, and when it needs
to be made in the context of a rapidly changing environment, then those are the
kinds of decisions that candidly need to involve fewer people, not hundreds of
people.
Now having said all that, so I believe, you may not agree with me, but I believe
that we made the right decisions -- the decisions that were necessary. Painful?
Absolutely, but necessary to protect this business for as many people as
possible. And I also believe that the nature of the decisions and the nature of
the environment we were engaged in meant that fewer people could be involved as
opposed to hundreds.
Having said that I think we did not do a good job of implementing some of those
decisions. I think we did not, so now I'm talking about process of
implementation and process of communication. I think we did not do a good job of
implementing some of those decisions or communicating some of those decisions.
And those are lessons learned. We have to do things differently next time when
we roll out a decision that by its nature not everyone can be involved in, we
have to somehow handle differently how we get people involved in how did we get
here, what does it mean, and how can you help. So, absolutely, mistakes made and
lessons learned. Did I get to your points?
[EMPLOYEE Q4, CONT.]: Yes, yes. You addressed the, that as you explained that
the process that HP has had may not be able to be maintained if it's a process
that was a 12-month process and now we only have nine months that we've been
able to use it, we're going to have to stop, and we recognize that. So yes,
understanding the process culture and being able to say when processes change.
CARLY: And let me also bring it closer to home in the sense of process of
decision making versus communication and implementation on this merger for
example.
As you can understand the decision to acquire or merge with another company is
not one that can engage hundreds of people. It can't engage hundreds of people
because there's a requirement for incredible security of information. It cannot
engage hundreds of people, although it needs to engage the right people because
in many cases people won't have the information they need to make the right
decision.
But having made a decision then we have to communicate in an effective way. And
I don't think initially we communicated particularly effectively. I think we
made a mistake initially in
saying to people, gee, don't worry about this merger, let us worry about it and
you worry about your day-to-day jobs. Well it's hard for you to stay focused on
your day-to-day jobs when you feel uninformed, when you feel ignorant, when
you're being bombarded by press and questions and you feel ill-prepared. And so
we had to adjust, and say, wait a second, we have to be a lot more aggressive
about the information we provide, not so that you're distracted, but so that in
fact you can stay focused on what you have to do. So I think we learned in that
process as well.
I hope some of you also remember me saying when I got here, well, someone asked
me early on in my tenure, many people actually, well, you know, if you're
talking about moving about moving quickly, if you're talking about being more
aggressive in the marketplace, if you're talking about growing and changing and
reinventing, doesn't that mean we're going to make mistakes? And the answer is,
yes, it does.
And what I said at the time and what I always say is, the key is not to make the
same mistake twice. But for people to assume and expect perfection is
unrealistic. The key is, and you've heard me use this phrase: Look in the
mirror, see the truth, speak the truth, and act on the truth. And we absolutely
made mistakes. We've got to learn from them and keep going. But we can't be
paralyzed by a desire for perfection because perfection is not progress. And
remember as well: Forward velocity with sufficient momentum. Remember that
phrase? Forward velocity with sufficient momentum. That's key in technology
companies.
[EMPLOYEE Q5]: Hi, I'm [employee name]. This will be a different question for
you, and this is post-merger. Can you tell us what you think the role will be of
the Chief Technology Office. Will there still be a Technology Council and will
its current scope expand to allow the chief technical officers to exude more
operational influence in their businesses.
CARLY: Okay. So, first to the short one. There will still be a Technology
Council, and I think, we are engaged right now in building, in a great amount of
detail actually, the governance for the new company, and what I mean by
governance is what are the forums? What are the processes? How will we interact
as a company on operational issues, on strategy issues, on technical issues?
What kinds of operational reviews will the CEO attend? What kinds of operational
reviews will the business heads and the president have? Those kinds of things.
And in that, the reason I go there is because I think what you will see is
closer and closer linkage between the Technology
Councils and the Strategy Councils, although both will continue to exist. But
we're trying to get the time frames and the charters of those two councils even
more closely linked because technology is the driver of strategy, and strategy
is a driver of technology choices.
Secondly, I think the role of the Chief Technology Officer will be relatively
the same, recognizing it's a fairly new role for us in HP, and what I mean by
that is, the chief technology office and officer, and it really is a team of
people, by the way.
What we're forming is a team, just as we have in HP today, a team of CTOs, most
of whom are associated directly with key parts of the business who come together
and talk about technology issues that are companywide in their implications, and
so that structure will continue to exist, and it is the technology teams,
technology office teams' job to do a couple of really important things.
One, make sure that we are focused on the key technology issues that determine
our future. And that means, in my view, understanding where our biggest
vulnerabilities are, technologically. Where do we have gaps that we really need
to fill and understanding what the coming opportunities and challenges are going
forward. And so, a great example of something that's going on in HP today that
is, I think, illustrative of the role is the Chief Technology Officer and the
Technology Council are helping us navigate our way around and through and among
dot.net, Sun's competing version. What do we do with IBM and AOL? Those are
incredibly important choices for the future of this firm, and they are not
choices that can be made by a single person, or even by a single business. So
that would be illustrative.
And one of the things that I'm, I guess, most excited about with this new
company is this is a company that will boast a $4-plus billion R&D spend
annually. That is a powerhouse technology company. But we need to make sure that
we're taking advantage of that whole portfolio and that is the role of CTOs in
the company.
And I guess to your last question specifically -- well, does that mean a CTO can
tell a business what to do? -- is basically, what you asked.
[EMPLOYEE Q5 CONT.]: No, no, not really.
CARLY: No, exactly, I'm turning up the contrast to make a point. You know, the
most important decisions companies make are all about the seams. The things that
are hard, not easy. So, is it right for an operating head, when faced with a key
technology
choice that has implications far beyond their business, is it right for an
operating head to say, you know what? I'm an operating guy. You're a CTO. I
don't need to listen, go away. No. It's wrong.
Likewise, is it right for a CTO to come to an operating head and say, you know,
I don't have any empathy or caring for what your here-and-now problems are. I
just want you to go off and spend a hundred million on this thing that may or
may not pay off. No.
The reality is, those two have to work in collaboration. And it will be, in some
cases, a contentious process that is going to have to get resolved through the
power of collaboration. And there's just no easy way around that.
The truth is, most hard decisions, the ones that really distinguish between
smart moves and not-so-smart moves, come as a result of collaboration and
contention, and I don't think we're going to get around that.
I guess -- the last thing I'll say on this point -- we are in the process right
now of completing our product line planning for the new company, and the CTOs
have been deeply engaged in that process. And I think it speaks to a)
collaboration, but b) influence that when you're making important things like
product line choices, you'd better have an eye on, where's the future. As well
as what's the current installed base and what do we want to do over the next six
months. So, hope that helps. You're welcome. Yes, right in the back, because I
skipped you before.
[EMPLOYEE Q6]: Hi, Carly. I'm [employee name], with the mobile computing
division. And I understand the strategy. I mean, I understand this is a tactic
towards accelerating our strategy. I guess I'm struggling believing in that for
a couple of reasons.
You know, the executive committee, the senior leaders of the company, are being
paid in cash. They're not being paid in stock to make this thing happen. They're
not being paid in terms of the performance of how this company, this new,
better, stronger company will perform. So, I struggle a little bit with why cash
versus stock?
CARLY: Are you referring to the retention program, is that what you mean when
you say cash?
[EMPLOYEE Q6 CONT.]: Correct, or the incentive to make sure the merger goes
through. So, I think I struggle a little bit with that. I struggle with the fact
that the PC organization's, part of an organization that I come from, is
consistently referred to
as sick or unhealthy and therefore we need to execute on a strategy. We need to
do something, and yet, we're turning in pretty phenomenal performance, despite
economic conditions. We're No. 1 in home PCs. We're consistently gaining share
in notebooks. I guess I don't feel that we're so sick, and I don't think,
understand quite how Compaq, buying Compaq enables us to be less sick.
CARLY: Okay. So, let me start with the paying in cash. I think what you're
referring to is the retention payments, or retention program that we have put in
place for about 6,000 HP people. And there's an equivalent number on the Compaq
side.
Retention payments were used in the Agilent split. By the way, this isn't the
first time we've used them. It's pretty standard practice that when you are
engaged in a complex change that puts certain people at risk principally because
they may not know what their new job will be -- and yet you need them to execute
through a period of time -- that you give them special incentive to stay in
place and execute and also if the day comes where they need to be severed from
the payroll that they're appropriately compensated. So, that's what those cash
payments are. They are balanced retention and severance, meaning they are used
both to retain key people in place, as well as to appropriately compensate them,
if and when the time comes that we sever them, because we've said very candidly
that, you know, we have overlap in these two companies. We have two of a lot of
positions. And so, in some cases, one of the people in that position will not
have a position any longer in the new company, and we need to appropriately
compensate them.
So, again, not the first time we've used them. We did this same thing during the
Agilent split to not quite as large a number of people, because it affected less
people, but nevertheless, pretty standard.
Our need to do that was also created by the fact that on the Compaq side, Compaq
had -- which is, again, not uncommon -- Compaq had a set of what are called
change in control provisions that were triggered if their company had a change
in control. Change in control could be if someone moved to acquire them, as we
did. Change in control could mean if somebody bought a lot of their stock,
certain things would be triggered and those people would get money by leaving,
and so we wanted to change those so that they were incented to stay.
So hopefully I've explained that. Are you okay on that? So, I think it is,
frankly, a misrepresentation to say people are being asked, people are getting
paid cash to stay, and are not tied to
the success of this merger. That's just not an accurate representation of what
we're doing.
So, the PC business has done a lot of things well. As you point out, we're the
No. 1 consumer PC business. We are fastest growing in notebooks. We've done a
lot of things right, and we are also losing four points of operating margin a
quarter. Dell makes four points of operating margin a quarter.
So, the reality is, while we're doing a lot of things well, we are off by eight
points. That's not sustainable to compete with Dell, and it turns out there are
two things we need that we don't have.
We have a retail PC business model that works. But we lack direct distribution,
and we lack a commercial PC business model that works. It turns out that Compaq
acquired a company about a year and a half ago and invested almost a billion
dollars in building a direct distribution capability, which is a business model
that Dell, as you know, has perfected. And now, Compaq puts 70 -- seven, zero --
percent of their North American volume through that direct distribution
capability. Dell puts 70 percent through that direct distribution capability, of
commercial volume. I'm talking commercial. You know how much we put through?
About 15 percent. It's not competitive.
Second thing is, Dell achieves about 70 inventory turns a quarter through that
direct distribution model. Compaq, in their last quarter, just achieved 62. We
achieve about 25. Not competitive.
So, the reality is, if we want a competitive PC business, we've got to take what
we do well -- and there are things we do well. And, by the way, we do a better
job in retail than Compaq does and than Dell does. We've got to take what we do
well and we've got to put together some things that other people have spent more
time, more money, and achieved greater progress than we have. That's what we've
got to do. Because if we want to stay in the PC business, we have to be able to
return three to five points of operating margin, quarter after quarter after
quarter. And today, we don't. And while we can all look at the technology
downturn and say, you know what? It was a tough time. And it was. The reality
is, Dell made money all through that time. So, those are competitive realities
we just can't ignore.
[EMPLOYEE Q7]: I'm [employee name]. I'm working for [inaudible]. From some of
the questions, it seems that there has been a gap created between the board of
directors, yourself, and a lot of employees, so how do you want to go ahead and
bridge that gap?
How do you want to go ahead and make this company a great company to work for
during the difficult time of the merger and after, as a combined company?
CARLY: Well, what do you think? I mean, rather than... no, no, I'm serious. I'm
serious. What I'm asking is, you said it seems from a lot of other people's
questions. What do you think?
[EMPLOYEE Q7 CONT.]: What I think is, first, make sure you, as a board of
directors, don't think that you have all the truth.
CARLY: We don't.
[EMPLOYEE Q7 CONT.]: And make sure that you basically listen very carefully to
all of the feedback. Like, for example, this person here talking about the cash
versus something else. This is the way people basically perceive things. And
perception is really, extremely important.
CARLY: No question. No question.
[EMPLOYEE Q7 CONT.]: So, I think, first, looking at that, and then, second,
really making sure that all of those core values, like the employees and the
value of the employees is really remaining as something really important in this
company. I think when the merger was announced, the first thing that people saw
here in the San Jose Mercury News was we're going to have like this synergy, and
we're going to have a lot of job cuts, basically, the 15,000 magic number that
was going out. So, basically, a lot of people, including people from here in
Cupertino, the [inaudible] division, a lot of people thought, you know, I mean,
this doesn't make sense. This is not HP any more. So I would like to have some
of your perspective on this.
CARLY: So, first, I would never -- that's okay, you can sit down, unless you
want to stand up -- I would never want to suggest that senior management or the
board of directors has all of the answers to all of the questions. I would never
want to suggest that.
But I do think that what we're trying to convey, not always perfectly, and it
absolutely gets sometimes either perceived inappropriately or reported
inappropriately. What we're absolutely trying to convey as candidly as we can,
is all of the information that we used that we have to make the decision we
made.
Because, in the end, what the board and management is doing is its job. It is a
board and management's job to make the
strategic decisions on behalf of a company. That's what we're paid to do. It is
not my job to develop a product, nor would I know how to do it. And so I
wouldn't go in and tell somebody else how to do it. We're trying to do our job
and trying to be candid about the information we're using to do our job.
Secondly, I think one of the things that is unfortunate is the characterization
that the board process somehow did not hear or debate all points of view. We
heard and debated all points of view for two-and-a-half years. We heard and
debated all points of view throughout the entire summer. We heard and debated
all points of view, meaning all of the board of directors, all of the management
team, all of our outside advisors, not [just] the board, [but] not the opinions
of every single employee. We couldn't do that.
But to suggest, for someone to be suggesting now, that we didn't go through a
deliberate debate is not an accurate reflection of the facts, and it's our duty
to set the facts straight.
What was your last point? Because I wanted to come back and...
[EMPLOYEE Q7 CONT.]: How do you make this company a great company to work for?
CARLY: Yeah. Yeah. So, but something else was floating through my mind,
something that you'd said earlier. Oh, 15,000. Thank you. Exactly. Thank you.
Fifteen thousand people.
First of all, I absolutely understand why when people hear 15,000 people, they
get concerned. Of course. Particularly on the heels of a workforce reduction.
And, as I said earlier, layoffs should always be a last resort, not a first
resort. But I think one of the things that we probably haven't conveyed well is
that there is a big difference between looking at two companies and
strategically taking 15,000 jobs out across two companies on a global basis over
two years in a way that we control. You have to figure out a way to make money.
Because without profitable businesses, you cannot preserve jobs. You cannot
continue to make contributions to communities. You cannot continue to invest in
R&D. It is fundamental. It is fundamental.
I mean, our NT business. It's not because people aren't doing a great job.
People are doing the best job they can. That's not the point, but our NT
business has been losing money for two-plus years. That's a fact. We've got to
fix it.
Now, how do you build a company that employees can be proud of? You have to
start with, the reason I go through all that, a healthy business is a
foundation. It's not enough but it's a
foundation, and if you can't build on the foundation of health, competitive, a
competitive business that can make money and lead, then everything else, we're
just kidding ourselves for the long term. We have to be able to grow. We have to
be able to make money and that is the foundation upon which we build.
But, I think what it comes down to is, on the foundation of healthy businesses,
we do have to practice the values. We have to have a business that allows people
to bring their whole selves to work, that gives people an opportunity to
contribute in real and exciting ways, that gives people an opportunity to learn
and to develop and to grow, that gives people an opportunity to collaborate with
others in a way that's fun, that treats people with respect.
All of those things have to continue to be a hallmark of this business, and all
of those things take work every day. And every day, frankly, with this merger or
without it, every day, there will be places where we come up short, and every
day, there will be places where we do it well. So, it's one of those constant
works in progress.
[EMPLOYEE Q8]: Hi, I'm [employee name]. I manage sales training. So I have a
two-part question, but it's related, the two parts.
CARLY: You guys all should go to journalism school. You know, these two-part
questions, three-part questions.
[EMPLOYEE Q8 CONT.]: And they're both about integration and execution. So, one
is that you had mentioned early on that you want to keep the portfolio together,
and I support that a hundred percent.
I'm in sales training. I'm trying to do solution selling training, right? But
currently our metrics do not support solutions.
CARLY: Yes, you're right.
[EMPLOYEE Q8 CONT.]: Not just training. I mean, period.
CARLY: No, you're right. You're absolutely right.
[EMPLOYEE Q8 CONT.]: And so, I'm looking at the new divisions for the new
company, and I'm saying, what are we going to do differently in metrics? To
literally support solutions, for our sales folks, for our businesses, and not
just measure by product.
And a related question is that, getting back to perception, I think, we talked
about perception. I don't think that either HP or Compaq have traditionally been
perceived at executing cultural integration very well. Maybe that's an
understatement.
So, again, what are we going to do differently than we've done in the past? So
they're both integration-related questions.
CARLY: Okay. So, on the first one, you're absolutely right. And so, one of the
things we are doing literally right now in our integration team, we have a
go-to-market integration team. And you will be pleased to know that many of the
same people who've been engaged in building the go-to-market models for BCO,
building the total customer experience process, sitting out in the regions are
engaged in that, and we are, right now, in the process of designing the account
planning process and the compensation process.
Because, fundamentally, in the end, solution selling is all about how you
structure, how you plan to go after an account and how you get measured.
Absolutely. And we have to, you know, pardon me for saying this so many times.
It's all about the right balance, because solution selling is really important,
and we can't have crummy products and not sell them against more focused
competitors. So we've got to have a way of measuring both.
So, that's what we're in the process of trying to design right now, and, by the
way, with respect to the go-to-market issues in particular, there will be a
broader and broader set of people who are brought into that process. The reason
it has been kept to a fairly narrow set of people to date is because, when we
get into issues of facing customers, the regulators get especially nervous. And
so we've had to keep those teams very tight.
I mean, one of the things we're finding when we put these two companies together
is, we've both struggled with the same issues. From a different point of view,
perhaps.
[EMPLOYEE Q8 CONT.]: [inaudible]
CARLY: Well, it's good news in the sense that there are a known number of
alternatives. There are only so many ways you can fix the solution selling
product. So, the good news is, based on our collective experience, we kind of
know what all those options are, and so now we can weigh the pros and cons.
Your second question was around cultural integration. So, I mentioned earlier
the cultural due diligence process that we're going through. One of the things
you learn when you look at mergers, and I've looked at tons of them, is the ones
that work
-- and there are ones that work. The ones that work have a couple of
characteristics. One of them is, by the way, that they are bringing together two
companies that are in the same businesses, which is what we're doing here. Other
than imaging and printing, Compaq and HP are in the same businesses. Same
product businesses, the same services businesses. We're in the same countries.
We're doing the same stuff, basically.
But one of the second key lessons you learn, in addition to speed and program
management and discipline and all those things is, you better deal with cultural
integration with the same discipline as you deal with, as I said earlier,
product line integration.
The cultural due diligence process that we've just concluded has given us a lot
of data about what the cultures of these two companies are. And, by the way, the
core values, the things that employees say matter to them, are the same in both
companies.
I mean, if you talk to a Compaq employee, they will talk about respect for
individuals and high esteem and integrity. They won't use exactly the same
words, but they will end up in the same place, because those core values are
timeless.
But you get to differences of style and habit, as I expressed earlier. Do we
look to the past? Do we look to the future? Are we process oriented? Are we more
decisive and speedy and command-and-control oriented? Out of that data, we have
created what we're calling a gap-and-leverage analysis, and what that means is,
so it's pretty data intensive.
But there are -- and we'll be sharing all this at the right time -- there are 15
key cultural attributes that we think represent, depending on your point of
view, either the biggest gap or the biggest point of leverage between those two
companies, and what we're engaged in, and it could be both.
You know, a simple silly example, except it's real, would be, we use voicemail.
They use e-mail. I mean, some of you in the integration teams know. So, you
know, we kind of fly by -- such as, didn't you get my e-mail? Or didn't you get
my voicemail? But, we're talking about more substantive, obviously, distinctions
than that.
And what we're doing now is building an action plan around each of those 15
attributes, on how is it that we close this gap or leverage this catalyzing
effect, one way or another.
I indicated that we need more speed. Well, Compaq needs more process, and one of
the things you'll find out, when you go into
Compaq and interview all these employees, we find out from the data is, they
say, we need more process.
And so, they look at this as a leverage opportunity. Now, they also, by the way,
really don't get all of those color handouts we use with tons of ink. You know,
they kind of freak on that. So, like one of the habit differences we have is,
you know, they're all using their PCs and we're handing out all this paper, and
they say what are you doing? Ink, ink, color, ink. Now, they're starting to get
it, you know? They're starting to hand them out, too, but anyway, that's a whole
other...
But you know, those are silly examples, except that if you don't like talk about
those openly, people can really fly past each other and get very frustrated and
upset.
So, that's what we're doing right now is building those action plans around each
of those 15 key levers, and we're using the experiences of the integration teams
as a real important guide, because one of the things that's going on in the
integration teams is, we're experimenting with and then systematizing techniques
that tend to get people past the differences, or at least table the differences,
quickly, so that folks understand why they may be missing each other. We use
language in very different ways, in some cases.
I mean, we'll use a term and they'll use the same term, but it will mean
different things. Well, that's okay, as long as you know that. Am I answering
your question?
[EMPLOYEE Q8 CONT.]: Yes, you are.
CARLY: And this will be, by the way, this will be an ongoing process that goes
on. It's not going to be done in a week or two. It's not going to be done in a
month or two. It's going to take years. Just like the process of any cultural
change takes years, and by the way, again, when I say cultural change, we're not
talking about the core values.
You remember, any of you remember me quoting Darwin? Okay. I guess I'd better
quote Darwin, so Darwin said, it is not the strongest of the species who survive
nor the most intelligent, but those most adaptive to change. Well, you know
what? That's true of companies, too.
Those most adaptive to change are the companies that survive, and so this change
process, adapting, adapting, adapting, adapting, which is really what cultural
change is all about. It's about adaptation. It's going to be an ongoing process.
So, you'll
hear and see a lot more about it. Whoa, that got all the hands in the air.
[EMPLOYEE Q9]: [Employee name], HP Services. We've been talking a lot about
internal situations, what we need to do, etc. My concern is more on the customer
side. We have a lot of internal focus on while it is our duty to go and make
sure that everything that needs to happen with the customer happens well. What
else are we doing as a company to insure that they don't feel we're too
distracted doing internal stuff?
CARLY: Now, it's a great question. Well, first, based upon everything we see to
date, we continue to execute well in front of customers. Certainly, that's true
in services.
So, one way of testing it is to look at how are we performing in the market
relative to our competition? And, to date, we continue to execute well there. A
second way of paying attention to it, to put a little more granularity on it, is
we made some assumptions. We were talking about assumption earlier.
We made some assumptions about revenue loss. We assumed, to be conservative, to
be prudent, that we would lose some revenue in the transition. We hope we don't.
We're going to task teams so that we don't, if possible, but we assumed we
would, and we thought it was -- to provide all the facts to shareowners, we
said, yeah, we're going to lose some revenue, and here's how much we're going to
lose in each segment, and that revenue-loss assumptions, those were built up
segment by segment, kind of a bottom-up approach. What do we think is likely to
happen?
And so one of the things we've been doing is testing what's going on in the
market versus those revenue-loss assumptions. Because if we started to see us
doing much worse than those assumptions, that tells us something bad. Well, the
truth is, we're doing much better than those assumptions, and so, that's another
way. But, then of course, what it really comes down to, what it really comes
down to is what a customer says. And that really comes down to, how are our
people who talk to them every day, how are they executing with customers?
I mean, there's no substitute. I can call, I mean I talk to probably 10 or 15
customers a week. You know, just kind of check in. How `ya doing? How are we
doing? And without exception -- that's not true, one exception. There was one
exception where we lost a deal recently because the CEO was concerned that we
might get distracted. He didn't see any distraction. I mean, I pushed him. He
said, no, but I'm afraid you're going to get distracted.
But with that one exception, customers are telling us we're executing. They
understand.
And, in the end, all customers care about is, are you going to get it done? Is
it going to be good for me? And please don't take your eye off the ball at any
time. So.
[EMPLOYEE Q9 CONT.]: So that was my question. Are we putting enough energy
externally to make sure that, you know, after all, we're only here because our
customers are out there?
CARLY: Well, certainly, that is clearly our intent. The management team --
really, it's Bob Wayman, the CFO, and myself -- who are out talking to
investors. Everyone else is focused on customers and integration and running
their business every day. It is a subject that we are all very sensitive to, and
I guess I would make the offer to all of you -- those of you who touch customers
every day -- the same offer I made in a worldwide sales call a couple of months
ago that I keep reiterating.
If you have customer engagements where you believe customers need reassurance
that we won't get distracted, recognizing that ultimately you'll have to deliver
on that pledge in addition to me, all you've got to do is call. Because I've
talked to a lot of customers on that subject over the last several months, and
will continue to.
[EMPLOYEE Q10]: Hi, I'm [employee name], with corporate HP IT. So I want to say
that IT is the business and I believe that, but that's not what my question is.
I'm sure you've heard all the terminology around an elevator pitch, so if you
got in an elevator in California, which would only be four floors, with an
employee, what would you say in that one minute to convince them and to get
their trust and to get their enthusiasm behind what HP is doing right now and
keep them on board?
CARLY: Well, you know I'm going to punt, and the reason I'm going to punt is
because that's one of your questions, you're damned if you do and damned if you
don't. And the reason why I say that is, I have a lot of employees who say to
me, you know what? I don't want the one-minute pitch because I don't believe it.
It's too glib. It's too pat. It's more complicated than that. And it is.
I also think that ultimately as many employees as I have a conversation with,
and I've had a lot, and I continue to have a lot more, and I appreciate you all
engaging in this one.
In the end, actually, in addition to what I say, what's most impactful to all of
you, is probably what you say to each other. What your friends say. What your
co-workers say. Maybe what your immediate boss says. But, in the end, it's what
you guys think and say to each other, more than it's what I say to you.
And so, I guess I would, in some ways, unfairly turn it around and say if this
is something you believe in, then you need to think about how you convey that to
others, because what you believe is important to others. It really is. It's
important to the customers you interact with, it's important to your colleagues,
it's important to your friends, and it's important to your families.
And just as no company can be a single person, this merger will not succeed,
absolutely will not succeed, if I'm the only one who believes.
Now, we do a lot of surveys, a lot of employee groups, and we know -- because we
pulse employees once a month through Web-based anonymous surveys, random -- we
know where people's, generally, heads are, and [we believe] people generally are
supportive and concerned. Concerned about what does 15,000 mean? Concerned about
integration, concerned about a whole set of things that absolutely they should
be concerned about. Those are real issues. And we shouldn't sweep them under the
carpet.
But I guess one of the reasons I think we can and will execute this is because I
do think the majority of employees are going to stay focused on what they need
to do.
I will use that, though, as a segue to make a following last set of remarks, and
maybe it's the one-minute pitch. Maybe it's not.
First, this is a company that, while it is unique, cannot escape the realities
of the world in which we compete. We cannot escape the realities of the industry
in which we are trying to compete, which is transforming in front of our eyes.
We cannot escape the realities of competitive performance because no matter how
unique we think we are, and we are in many ways, there are loads of companies
out there just waiting to eat our lunch every single day. And that will never
change.
So, every company, no matter how great its past, no matter how unique its
capabilities, every company must navigate through the ocean it finds itself in,
period. We might wish we were in the Pacific Ocean, when, in fact, we're in the
Atlantic Ocean, but wishing doesn't make it so.
I think the second thing I would say is, this is all about, in my view, this is
all about this company living up to its potential. It is all about this company
being worthy of its legacy. And with all great respect to the people who built
our legacy, the people who are going to build the future are here today. They
are you, and they are all your colleagues around the world.
We could be, we could have smaller ambitions for this company, but those smaller
ambitions would not be worthy of the name, the legacy, or the capabilities that
this company has.
And I guess the last thing I would say is, we are prepared for this. Would we
have been prepared a year ago? No. Would we have been prepared two years ago?
Absolutely not.
But we are prepared for this today and we can do this. And we can do it based
upon how we're integrating today, where we are at or ahead of every milestone
we've laid out, and that's based on the 500 HP people and Compaq people who are
sitting in there every day, working through the tough issues. I see heads
nodding, because they're doing it.
And I can see it based on what we're doing in the marketplace every day and
continuing to keep our eye on the ball and we're prepared because we have made
tough choices and tough decisions that have meant pain and sacrifice but they
have given us the capability to continue to compete and win.
And so that's what I think this is about. It's about building a company, and the
process of building a company can never stop. Because the day you stop building
is the day a company starts to fall behind. And that is reality from which we
can never escape.
Thank you for coming. Thanks for asking the tough questions on behalf of all
your colleagues. We continue to have what we call an issues log, where we take
issues and questions from employees and continue to get more and more
information out, so if there are additional issues, questions that you know have
been stimulated by this conversation that you want to get to me or others,
please do that, and we'll continue to keep the dialogue going, because we will
do this together, and I think it's going to be incredibly exciting. It will also
be hard. But most good journeys are.
Thanks very much.
[END]
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements that involve risks,
uncertainties and assumptions. If any of these risks or uncertainties
materializes or any of these assumptions proves incorrect, the results of HP and
its consolidated subsidiaries could differ materially from those expressed or
implied by such forward-looking statements.
All statements other than statements of historical fact are statements that
could be deemed forward-looking statements, including any projections of
earnings, revenues, synergies, accretion or other financial items; any
statements of the plans, strategies, and objectives of management for future
operations, including the execution of integration and restructuring plans and
the anticipated timing of filings, approvals and closings relating to the Merger
or other planned acquisitions; any statements concerning proposed new products,
services, developments or industry rankings; any statements regarding future
economic conditions or performance; any statements of belief and any statements
of assumptions underlying any of the foregoing.
The risks, uncertainties and assumptions referred to above include the ability
of HP to retain and motivate key employees; the timely development, production
and acceptance of products and services and their feature sets; the challenge of
managing asset levels, including inventory; the flow of products into
third-party distribution channels; the difficulty of keeping expense growth at
modest levels while increasing revenues; the challenges of integration and
restructuring associated with the Merger or other planned acquisitions and the
challenges of achieving anticipated synergies; the possibility that the Merger
or other planned acquisitions may not close or that HP, Compaq or other parties
to planned acquisitions may be required to modify some aspects of the
acquisition transactions in order to obtain regulatory approvals; the assumption
of maintaining revenues on a combined company basis following the close of the
Merger or other planned acquisitions; and other risks that are described from
time to time in HP's Securities and Exchange Commission reports, including but
not limited to HP's annual report on Form 10-K, as amended on January 30, 2002,
for the fiscal year ended October 31, 2001 and HP's registration statement on
Form S-4 filed on February 5, 2002.
HP assumes no obligation and does not intend to update these forward-looking
statements.
ADDITIONAL INFORMATION ABOUT THE MERGER AND WHERE TO FIND IT
On February 5, 2002, HP filed a registration statement with the SEC containing a
definitive joint proxy statement/prospectus regarding the Merger. Investors and
security holders of HP and Compaq are urged to read the definitive joint proxy
statement/prospectus filed with the SEC on February 5, 2002 and any other
relevant materials filed by HP or Compaq with the SEC because they contain, or
will contain, important information about HP, Compaq and the Merger. The
definitive joint proxy statement/prospectus and other relevant materials (when
they become available), and any other documents filed by HP or Compaq with the
SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In
addition, investors and security holders may obtain free copies of the documents
filed with the SEC by HP by contacting HP Investor Relations, 3000 Hanover
Street, Palo Alto, California 94304, 650-857-1501. Investors and security
holders may obtain free copies of the documents filed with the SEC by Compaq by
contacting Compaq Investor Relations, P.O. Box 692000, Houston, Texas
77269-2000, 800-433-2391. Investors and security holders are urged to read the
definitive joint proxy statement/prospectus and the other relevant materials
(when they become available) before making any voting or investment decision
with respect to the Merger.
* * * * *