HP-Compaq merger 'will save billions'

The recently completed merger of HP and Compaq will save the company billions of dollars, according to HP CFO Bob Wayman.

Speaking at the launch of the newly formed HP yesterday evening, he outlined the vast cost savings - and job cuts - he expects to make over the coming months.

"What we see is an opportunity to remove overlap and redundancies in all areas of our cost structure. At many levels we see people doing the same kinds of jobs and we rationalise we'll be able to take some of that duplicate out," he said.

The company hopes to save one per cent of its manufacturing procurement costs, back-end infrastructure overheads and consolidate its server manufacturing.

Wayman predicted that in time, the company should be able to save three or four per cent, or over $1bn, of its supply chain costs.

Research and development (R&D) will also get the once-over as duplicated developments in PCs, integrated systems services (ISS) and Unix are eliminated.

Marketing will also lose staff as some campaigns will be axed. However, an estimated $4bn will be spent on R&D each year, said Wayman, representing 15 to 17 per cent of sales instead of the 30 to 40 per cent spent by most companies.

Wayman also predicted the company could save more than the originally estimated $2.5bn.

HP CEO Carly Fiorina reiterated that around 15,000 redundancies are expected as a result of the merger. A number of programmes, such as voluntary redundancy or relocation options, are reported to be on offer to employees.

She said: "In terms of position elimination, we will begin that process very quickly. We will roll those programmes out next Monday and hope to get the bulk of those folks out within six to nine months. But we are subject to the employment laws of individual countries."

The amount Capellas and Fiorina will receive for completing the deal has still to be decided. Fiorina claimed the compensation committee had yet to meet to determine the figures. Previous reports suggest Fiorina and Capellas could profit by $70m and $47m respectively.

Significant changes were also outlined for HP's channel partners.

The newly integrated company will focus more heavily on its direct sales through HP.com using the technology Compaq developed for its former online sales.

Michael Winkler, vice president of worldwide operations at HP, said: "Compaq was further ahead in its PC direct capabilities and that is one of the attractions to the company so we adopted it. HP.com has three million pages of content, there are two million unique visitors a week and 10,000 different products and configurations for sale."