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Hewlett Packard/Compaq Benefited from their Merger, Says Ann Livermore

May, 2003

STANFORD GRADUATE SCHOOL OF BUSINESS—Ann M. Livermore, executive vice president of services for Hewlett-Packard, recalled the round of raspberries that greeted the company's September 2001 announcement that it planned to acquire Compaq.

"Wall Street hated it. Investors hated it. Employees hated it," she told the Business School audience at a May 5 View from the Top presentation. "The one group that universally thought it was a good idea was our customer base."

Livermore suggested that many parties were resistant to the merger because it signaled the end of an era—consolidation is a sign of a maturing industry. But HP recognized it was time for consolidation if it was going to continue to respond to its clients.

"You have to have scale and you have to have a lot of revenue to invest in R&D," she said.

The naysayers warned against such a big merger and claimed it would be impossible to integrate the cultures of the two companies.

But HP and Compaq were prepared. "Before we announced the merger, the product road maps were done," Livermore said. The companies already had determined which divisions had the strongest sales. Even more important, by the time the deal closed, the top 120 executives were in place in the new firm. "The managers brought great stability to the transition."

On the eve of the deal's one-year anniversary, Livermore listed HP's accomplishments: No. 1 market position in Unix servers; No. 1 in Linux servers; No. 1 in Windows servers; alternating with Dell for the top position in PC sales; No. 1 in external storage. And, HP, the leader in printer sales, had its best three quarters ever.

Services, Livermore's division, moved from 8th to 3rd nationally. Last month, HP beat service leaders IBM and EDS for billion-dollar contracts with Procter & Gamble and Ericsson. A recent Information Week research survey of 700 IT professionals ranked HP Services No. 1 in overall customer satisfaction.

Livermore's division targets a few big contracts a year. "We're still about half the size of IBM. From a customer perspective, we're big enough. We get invited to every big opportunity now."

A native of Greensboro, N.C., Livermore still carries a trace of home in her accent, even though she's been in California since she came to the Graduate School of Business more than 20 years ago. She has been at HP ever since she graduated from the GSB in 1982.

Livermore, who went directly from earning her undergraduate degree at UNC-Chapel Hill to Stanford, told the student audience she thinks she would have gotten more out of business school if she had worked first. "I was at a big disadvantage" in classes where she was required to apply theory to practice. "The people who get the absolute maximum out of business school have some work experience."

Although it has become unusual for an executive to spend so many years at one company, Livermore said it has its advantages. "I've been able to get experiences across multiple companies and multiple functions."

Sometimes she has taken jobs she hasn't wanted because they've given her a chance to learn things that would be useful to her down the road. Trained as an economist, she felt far from her comfort zone when she went to work in R&D.

"It was a rite of passage. I knew if I ever wanted to be a general manager, I was going to need to run R&D. I didn't understand half of what they were saying at our first meeting." But before long she realized that managers were trying to make decisions that should have been made by the engineers. Her job was to change the conversation so that the managers were handling the right set of decisions—costs, resources, time, deliverables—not tech standards. "What is going to unleash the power of the team? That's what I had to figure out."

The time she spent in R&D helped her earn the respect of tech-side employees and understand another of the company's functions.

Livermore recalled a business school assignment requiring her to figure out how to dispatch the tasks in an overflowing in-basket in time to catch a plane two hours later. "What I use the most are all the soft things I learned in business school, things like time management and working in teams. A lot of the dynamics you learn from working in groups is key."

Asked to speak about "work-life balance," Livermore quipped, "This will be short, because I don't have any. … For most top executives, this is not a reasonable expectation."

Her husband retired three years ago so that one of them would be at home with their pre-teen daughter. "And we buy a lot of help—we're lucky we can afford to do that."

Instead of seeking balance, Livermore said her goals are to have a happy family life and to do the best she can in her job. She said she thinks her family would agree that she's managed to do both.

"You might claim happiness—that's not the same as claiming balance."

by Teresa Moore

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