HP to revamp marketing as merger closes

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Hewlett-Packard Co., poised for its May 7 relaunch after a bitter proxy fight, will restructure into four divisions, each with its own marketing chief-a move that could give divisions significant control over advertising and marketing decisions, including agency alignments. And marketing executives from HP, not Compaq Computer Corp., will call the shots.

A number of executives involved in the matter said HP has made no decisions to put marketing matters solely in the hands of the divisions. Still, "There's a sense they will have a fair amount of autonomy," said one agency executive. HP's current alignment, with Omnicom Group's Goodby, Silverstein & Partners as lead branding shop, gelled in the late `90s under Chairman-CEO Carly Fiorina after decades of individual product fiefdoms.

Each division will have a VP-marketing, all reporting to an overall marketing chief, with those five executives coming from HP, according to two agency executives familiar with plans. How will the new marketing matrix affect HP vs. Compaq agencies? "Draw your own conclusions," one of the executives said.

Compaq's ad agency, Foote, Cone & Belding Worldwide, already has drawn some conclusions: John J. Dooner Jr., chairman-CEO of parent Interpublic Group of Cos., told analysts FCB has as a contingency factored a loss of Compaq into its 2002 planning numbers given "uncertainty" over the account.

HP's four new divisions are: Printing and Imaging, an HP stronghold; Services, also an HP strength; Enterprise Systems, Compaq's forte; and Personal Computing, where both have been major players. Division and corporate executives are said to be debating how to divide marketing control between units and corporate.

Based on computer revenue, HP will be the world's biggest computer marketer when it closes the $18.6 billion Compaq acquisition this week; IBM Corp. remains bigger when its software and services revenue is included.

STICKING WITH ROSTER

HP, which declined to comment for this story, is for now sticking with the existing agency roster: Goodby Silverstein, San Francisco, lead HP shop for branding, corporate and consumer ads, including the expected post-merger brand campaign; Publicis Groupe's Publicis & Hal Riney, San Francisco, and overseas siblings for HP's laser printers and business products and services; and Interpublic`s DraftWorldwide, for Compaq's direct business and FCB, New York, for Compaq products.

Optimedia, San Francisco, part of Publicis-controlled Zenith Optimedia Group, handles HP's global print and online media buying and planning; sibling Riney does TV buying and planning. HP has promised Wall Street merger savings of $2.5 billion by 2004 with a revenue drop of no more than 4.9% after overlapping product lines are eliminated. A drive to cut costs makes one thing seem certain: Overall ad spending is likely to be cut. Last year, HP and Compaq spent $1 billion and $357 million on global advertising, respectively, according to Securities and Exchange Commission filings.

rationale

With the deal done, HP must rationalize product lines. Among changes under consideration, executives said, are rebranding Compaq's Presario consumer PC as the HPresario and merging attributes of Compaq's iPaq and HP's Jornada handhelds.

No matter what the long-term plans, HP will need to move quickly to prevent customers from defecting to rivals. The protracted proxy fight pushed product ads to the periphery, while the newly merged company will face the prospect of customer poaching from rivals as information technology spending picks up over the next six months, said Tyler McDaniel, director of technology consultancy Hurwitz Group.

The takeover battle involving HP and dissident shareholder Walter Hewlett has tainted the much-vaunted "HP Way," industry analysts said. "The company image was trashed," said Rob Enderle, research fellow, Giga Information Group, adding he believes a new campaign will focus on issues of trust. New ads from Goodby are set to break as soon as May 7, marking the moment of the new company's birth.

HP's considerable challenges in integrating marketing, products, services and cultures are bound to give an opening to rivals such as Dell Computer Corp.

"The second most delighted person after Carly about this decision is Michael Dell," said Bob Gardner, president of San Francisco shop Gardner Geary Coll, agency for Walter Hewlett in the dispute.

contributing: mercedes m. cardona

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