Rank 10: Hewlett-Packard India: The Year of the Merger

Balu Doraisamy President Deepak Shah Finance Kapil Jain Services Neelam Dhawan Enterprise Sales and Systems Ravi Aggarwal Imaging and Printing Ravi Swaminathan Personal Systems Zarir Batliwala HR AK Thiagarajan Former President

This was the longest year in HP’s long history. The merger dominated
the media, and HP. It all peaked at a bad time in India: the crucial
January-March quarter, and the next. And both were also among Indian IT’s
worst quarters ever.

Performance Highlights Printers show slight units growth, revenue decline. Most product areas dip 36% systems revenue decline impacts topline Strengths Merger with Compaq in May 2002 brings systems, services, storage Dominates printers market. Inkjets mostly unprofitable, but... Huge inkjets base means steady, very profitable consumables supplies Weaknesses Post-merger: HR and integration issues will hit performance in first half Supplies business getting competitive Hewlett-Packard India Pvt Ltd l Startup: 1989 l Products & services: Printers, Servers, Workstations, PCs and services l Branches: 5 l Address: Chandiwala Estate, Maa Anandmai Marg, Kalkaji, New Delhi 110019 l Tel: 6826000 l Fax: 6826059 l Website: hp.com/in

The net impact of merger and market: HP sales dropped 13%, with almost all
product lines dipping. Systems fell 36%, dropping to much less than half the
pie. By default, printers brought in a bigger slice, but inkjet revenues
declined under price pressure and bundling to push the numbers. But printer
supplies grew a big 50%–to nearly Rs 300 crore. The new HP now has four
business units: printing and imaging, enterprise systems and sales, services,
and the personal systems group. HP’s smaller size in India (36% of the new
group’s revenues, versus Compaq’s 48%) and weak systems and services
position also meant that the new CEO and all but two directors in India came
from Compaq. Up ahead are M&A challenges beyond HR...Channels, for instance,
not only to integrate the two companies’ legacies, but also to service those
business units. A small battle is likely in consumables. With those fat margins,
HP should be guarding this turf with its life, as cheap clones flood the market.

The enterprise battle will be fought around the server, in the heat of the
Sun. While HP/UX and Compaq servers converge to the Itanium a few years down, HP
has to convince CIOs of a stable future and smooth migration. Its Superdome
could help.

This high-performance server supports a smoother migration from PA-RISC. And
it’s finally selling in India: to TCS, Tata Tele, BPCL, TCS, VSNL, et al. Next
stop: telco customers like Bharti and Orange. The merger’s happened. HP now
needs to move rapidly to regain the ground lost on the HR and channel fronts and
other uncertainty of the first half of 2002. With new managers, and with
channels and office-space and other integration ahead, there will be rough
water. Yet, strong systems and services now complete the picture for this
printer giant. And HP no longer has to compete with an aggressive Compaq!