May 2002

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HP executed its merger with Compaq, but few products died yet

After winning a three-day trial in Delaware’s Chancery Court over its merger ethics and practices, HP beat its drum on May 7 by announcing the first details of its product lineup. Most notable to HP’s 3000 customers was a less public announcement. An internal memo from Scott Stallard, who heads the Business Critical Systems (BCS) global business unit inside HP’s Enterprise Systems Group, reports HP’s MPE/iX development labs are now part of an HP support division, known as the Total Customer Experience and Support Division (TCSD, for those of you who want to follow on your post-merger scorecards). The memo was part of a story leaked by Computer Reseller News one day in advance of the official merger announcement; HP hadn’t been able to respond to us by the FlashPaper’s deadline to confirm the movement of this biggest part of the 3000 community’s remaining HP assets.

CEO Carly Fiorina said that with the merger approved, “it’s now time to execute.” HP proceeded after Walter Hewlett’s lawsuit was dismissed, and the former board member (HP dropped him when he filed suit) said he wouldn’t appeal the ruling. A Delaware judge heard three full days of testimony from Fiorina, HP CFO Bob Wayman and several managers of shareholder Deustche Asset Management, but the judge concluded in a 44-page finding that HP didn’t violate any laws while winning a 2.9 percent margin of victory. HP’s statements about the merger’s potential were not out of line with reality, according to the judge. Preliminary reports from HP merger planners casting doubt on the proposed numbers are not required by law to be aired for shareholders. Only the ethics of some managers at Deustche — which changed its share votes at the last minute to provide more than a third of the 45-million vote margin — were called “troubling “ by judge William Chandler.

A well-publicized voicemail between Fiorina and Wayman, where the CEO said HP might have to “do something extraordinary” about Deustche’s impending no vote, didn’t provide enough of a smoking gun for the judge. “I do not believe that Fiorina’s voicemail evidences an intent to employ improper means to persuade Deustche Bank to vote in favor of the merger,” Chandler wrote in his opinion. “She meant that HP management needed to take the steps necessary to gain an audience at Deustche Bank for HP’s presentation in favor of the merger.” Chandler said it was improper for the Deustche asset managers to be in a conference call with HP that was arranged by the bank’s line of credit managers. But the judge said he didn’t hear any evidence that proved Deustche was on the last minute call “in response to a threat from HP management to withhold future business [from Deustche].” The judge also noted that eliminating the Deustche shares still wouldn’t swing the shareholder vote outcome.

HP’s May 7 announcement of its product plans did not mention the HP 3000, but the division’s manager was among those named to new jobs in that memo from Stallard. In the unconfirmed memo, 3000 division chief Winston Prather will now head HP’s High Performance Technical Computing Division; it’s not yet clear if he’ll keep his CSY duties at the same time. Meanwhile, the memo identified Barbara Bacile as the head of the division where the MPE labs will live on, at least for a few more years. The memo said that TCSD division is the former “HP Customer & Supportability Technology Operation, and they will manage total customer experience (TCE), quality, business escalations and diagnostic tools for HP-UX software and hardware. To ensure long-term success of HP e3000 customer satisfaction, the MPE i/X lab will also join TCSD.” Another proprietary operating environment didn’t get its walking papers in the new HP plan, however; Compaq’s OpenVMS customers using the proprietary operating system developed by DEC will see HP “deliver on the previously announced Compaq OpenVMS roadmap, including the port to Itanium.” The VMS community wants a much stronger promise of its future than what HP has offered.

Compaq’s NonStop fault-tolerant systems survived the cut, one of many Business Critical Systems products to be marketed by Mark Hudson, who has led HP 9000 marketing for years and now gets to market products from Prather’s new division, as well as deliver a “consistent and compelling message” on HP servers. HP’s NetServer brands will be soon gone; Compaq PCs will be sold under the ProLiant brand to businesses, while the Pavillion PCs are now a consumer-only product. Compaq’s printer business will be merged into HP’s, but HP’s Jornada handheld systems next year will be just as discontinued as the HP 3000 — that’s to say no longer sold, but still working fine.


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