May 2, 2003 11:26 AM PDT

HP recasts its high-end computing group

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Hewlett-Packard announced on Friday an overhaul of its high-end computing group, including a move that more tightly aligns the sales efforts of that unit with HP's services effort.

Within its Enterprise Systems Group (ESG), HP is creating a single hardware unit that will be headed by Senior Vice President Scott Stallard. The company previously had three separate hardware units: business-critical servers, industry standard servers and storage.

HP also announced a business management and operations group, which will be headed by Howard Elias, who had led the storage unit. Elias and Stallard will report to Executive Vice President Peter Blackmore of the enterprise systems group. A global accounts unit, headed by Airton Gimenes, will now report to both services chief Ann Livermore and enterprise systems chief Blackmore.

Mary McDowell, who has headed the industry standard server unit, is planning a "short sabbatical," after which she'll return to HP as a senior vice president in an unspecified capacity.

"We have gone through a remarkable 12 months for ESG--tremendous progress," Blackmore said. "The objective behind this is to accelerate growth."

The restructuring comes amid a broad reshaping of responsibilities at HP. As part of a review process, the company is looking at how titles are assigned, clamping down on the number of vice presidents that report to other vice presidents and directors reporting to directors, according to sources.

Much of the issue, sources said, stems from the fact that HP had definitions of titles that differed from those at Compaq, which it absorbed a year ago almost to the day. A vice president at Compaq was essentially equivalent to a director at HP, for example.

The ESG shake-up comes as the company seeks to narrow losses in the unit, which is the only unit that HP said did not have a profit last quarter.

Ann Livermore "Yes, we had losses, but the losses are rapidly reducing," Blackmore said.

HP has pledged to return the unit to profitability before the company's fiscal year ends in October.

"We are on track to deliver what we committed to the company," Blackmore said.

Blackmore declined to talk about possible layoffs, saying that the unit is done announcing merger-related cuts. But like other parts of the business, he said, the enterprise division will continue to look at areas for cost savings.

A person familiar with the strategy said the move was designed to allow Blackmore more energy to devote to sales rather than managing product units. Previously, Elias, McDowell and Stallard all reported to Blackmore.

Peter Blackmore "It's widely felt that Peter is the best salesman in the company. And it was felt that Peter should focus on sales and leave other parts of the enterprise to others," the source said. "These changes are not critical of Peter. It was felt it would give him more time to focus on the areas that we most need, sales, especially international sales."

Prior to the merger, Blackmore was head of worldwide sales for Compaq.

The move also unifies under Stallard two server groups that had been separate: Stallard's Business Critical Systems (BCS) group, which sold high-end models such as Unix servers and the exotic NonStop line; and McDowell's Industry Standard Server (ISS) group, which sold comparatively low-end servers using Intel Xeon processors.

"I think that HP realized that ESG has been dysfunctional," with the two server groups issuing contrary messages, said Illuminata analyst Jonathan Eunice. There "clearly wasn't a lot of harmony and cooperation. I think there was a feeling that it had to be fixed."

In picking an executive for the combined group, McDowell might seem the natural candidate because "she's been enormously successful, over a very long period of time, in a very tough business," Eunice said. But doing so would have meant she'd have brought her commodity-component style to high-end products where that technology isn't sufficient. Stallard's ascendancy indicates that "the balance of power essentially (is) tipping toward the enterprise folks at the cost of the commodity computing folks."

News.com's Dawn Kawamoto and Stephen Shankland contributed to this report.

 

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