Carly F delivers anniversary message to HP troups

MY FRIENDS IN NEW ENGLAND tell me are they hearing this strange disembodied message coming from CEO Carly Fiorina right now, over the "Tannoy" and they'd like me, Eva, to share it with those who have left HP, Compaq and DEC, and those who are about to leave, on the anniversaire of the takeover of Mike Capellas' Compaq, or Big Q, as it used to be known, before Capellas was "Abelarded".

Let me briefly summarise what the leader is saying, because she is talking at some length, just like Mikey Qapellas used to do. But she's more eloquent. Look at the way she opens her paragraphs, repeating the motif over and over again, - almost like a politician does, and a kind of poetry in its own way, my friends confess as they listen to her dulcets.

Carly is making "strides" (trousers, as the Australians have it), and she's making a preposition [Surely a proposition? Ed.] to start a sentence with. She is cracking open the champagne again, "upping the pace of innovation", and dissing the competition in good old Compaq fashion. Lexmark in particular gets the "hard word". Now read on... µ

Carly Anniversary Message Follows
Good morning. Good afternoon to you wherever you are around the world and welcome to our anniversary celebration. One year ago, we set out to achieve a goal that many said was impossible - combining two proud companies to create the world's technology leader, and to use our scope, scale and power to deliver unprecedented value to more than a billion people around the globe.

Through economic uncertainty and international conflict, through a chorus of criticism and the challenge of competitors, we came together as one team and rose to meet the moment. Now, from the Americas to Asia, from Europe to Africa to the Middle East, HP is delivering more today, to more customers, than ever before in its history.

Thanks to your talent, your focus and your sheer hard work, we have achieved more in the past year than many imagined possible. So as we celebrate the first anniversary of our bold endeavor together, let's take a look at our progress - both the promises we made, the results we delivered and the challenges yet ahead.

Maintaining customer focus
From the very outset, we promised our customers that no matter how complex our merger, we would always keep our focus on serving them.

We promised customers we would be fully available to answer any questions about the combined company, our products and our services. We had 20,000 trained staff in our call centers on Day One. In the year since, we have successfully fielded over 100 million customer support calls all around the world.

We promised customers they would have product roadmaps within 30 days. And the roadmaps were complete and available - on Day One. Today, customers give us high marks for having made the right choices on those roadmaps, and for executing against them.

We promised customers we would launch a single, integrated HP website within 30 days. And that website, hp.com, was up and running in 21 languages with 10,000 SKUs and more than 3 million pages - on Day One. Today, hp.com is available in 35 languages, attracts more than 11 million unique visitors per month, and recently earned HP the No. 1 ranking among high-tech companies for online customer respect.

We also promised customers we would reach out aggressively to keep their business. And to achieve this, we named 800 senior managers, including region and country leaders, 170 client business managers, 25 partner business managers and 30 retail account managers - all on Day One. And within 10 business days, our customer outreach program had made more than 1,100 customer calls. Today, our account teams have built on strong, existing relationships, cultivated new ones, and taken our business even further.

Exceeding our goals
We achieved all this - we kept our focus on customers - even as we smoothly integrated two e-mail systems totaling 229,000 accounts and 24 million messages per week; networked nearly 220,000 desktops and 7,000 applications in 1,200 far-flung facilities; and prepared the @hp portal to withstand 2 million hits daily - all by Day One. Today, HP's management of our own IT infrastructure is a model our customers want to hear more about.

Thanks to literally a million hours of planning, and to your determination to deliver on our promises, HP hit the ground running and never looked back.

A year ago, we had nine supply chains. Since then, we have consolidated those to five. A year ago, we promised that synergies such as these would generate total annual savings of $2.5 billion dollars by 2004. We are already beating that goal, reaching a savings rate of $3 billion dollars per year, in just nine months.

A year ago, we promised both improved profitability and improved cash flow.

And, last week, in recognition of both, Standard & Poor's raised HP's credit rating and improved our credit outlook, citing, and I quote, our "overwhelming liquidity, ample access to capital...improving profitability and strong cash generation characteristics."

Upping the innovation pace
A year ago, we promised to innovate faster. Over the past 12 months, HP secured nearly 3,000 patents - the fastest rate of innovation in our company's history.

When we first announced the merger, and again on Day One, we were candid with the market that we would suffer revenue loss as a result of consolidating product lines. Even though the economy is taking longer to rebound than any of us would like, we've achieved sequential market share gains in almost every category in which we compete. And even as we streamlined our offerings, we also rolled out more than 100 new products in the first six months alone - many to critical acclaim.

I cannot begin to elaborate adequately on every accomplishment of this great team. So to all of you who have gathered today to celebrate this milestone - to all the tens of thousands of HP employees sharing this moment around the world - I want to thank you for rising to the challenge. We all know that this journey has not been easy. Change is hard. Our resolve and determination have been tested every step of the way. And I want to acknowledge, from my heart, that we have had to make some tough, painful decisions. It has taken many long hours and much personal sacrifice to bring us this far. But I am confident that these sacrifices are already paying off, and will for years to come.

So thank you for your trust. Thank you for your commitment. Thank you for all those hard days and late nights. Thank you for believing in our future together. Thank you for making this extraordinary success possible.

Making strides
A year ago, some of our biggest competitors were boasting that they would eat our lunch. Today, they admit they never thought we would make it this far, this fast. And they eye us warily, with newfound respect. As much as we have accomplished, we're just getting started. Now we must stay the course with courage and confidence.

A year ago, we laid out the operating model that will continue to define our success; that each of our business groups must be strong, competitive and profitable; and that we only achieve breakthrough operational efficiency and effectiveness by collaborating across functions, processes and organizations; and that we only win and grow when we leverage our complete portfolio of products and services. We still have real work to do to fully execute against this model, but let's look at some of the success we have already achieved.

PSG - which struggled to compete a year ago - is now competing on price while improving margins, and is achieving sustainable profitability ahead of schedule. We've introduced great new products, are outgrowing Dell in notebooks, and are winning more and more desktop deals because of the way we combine our products and services.

ESG has slashed its operating loss by 74 percent through Q1 of fiscal 2003, and will return to profitability this fiscal year, as we committed. We are sustaining or extending our leadership in the server, storage and software markets; aligning our products, OpenView software and services more tightly; and beginning to combine our computing and imaging assets in areas like digital publishing.

A year ago, competitors said IPG would lose momentum, but instead it delivered 50 new products, lengthened its lead by seizing another 6 percent of market share, and generated record profits while outgrowing the industry. Today, in our consumer market, we command more retail shelf space for our PC and imaging products than we did a year ago, and our success in the digital imaging category is paving the way for future wins in digital entertainment and mobility.

HP Services, which wasn't often considered for the all-encompassing mega-deals a year ago, has signed more than 200 outsourcing agreements over the past 12 months, and is now competing for the biggest deals in the world.

Earlier this month, Procter & Gamble selected HP for a $3 billion outsourcing deal - the largest services contract in our history, and a direct win over our principal rival, IBM. That win followed our recent $1 billion deal with the Canadian Imperial Bank of Commerce, and another with the Bank of Ireland worth $600 million dollars. Now, by any standard, these are big deals.

Customers aren't just turning to HP because of our new portfolio of products and services. It's also because of the example we set with our own transformation. We may take this transition for granted now, but other companies don't. They want to know how we did it, so they can manage their own, necessary transformations.

Following the leadership framework
Our success didn't just happen. Step by step, we made it happen. We made it happen one customer, one person, one decision at a time. We made it happen through planning, focus and discipline - rigorously following our Leadership Framework.

Let's take another look at that framework. We have laid out a winning Strategy. This includes our corporate objectives, our operating model, and providing the best return on IT, delivering simple and rewarding experiences to consumers, developing world-class cost structures, and focusing our innovation.

We also revamped our Structure and Processes. This includes effective alignment and governance of the vertical and the horizontal. That is, we're streamlining the company so we collaborate better and more efficiently, and leverage our size, scope and scale. We may report our business externally as four separate P&L statements, but we could not have achieved our success without steadfast attention to both the vertical and the horizontal.

We've re-worked our Metrics, Results and Rewards. We established the Balanced Scorecard to increase accountability, reward performance and cultivate operational excellence.

We're also focused on building a great Culture. We recognize that how we do things is as important as what we do; that character counts. Over the past year, we've looked hard at ourselves, at HP's values, and at what constitutes winning edge leadership. This is a process that continues even today. We'll be talking more about it at our June 24th all-employee meeting.

HP Value Proposition
Now I want to return to our strategy and add another element. It is the new articulation of HP's Value Proposition, why customers should choose HP over the competition.

Customers have been very candid in telling us they need us to deliver more. They want HP to be more aggressive and more proactive, focused on winning more of their business. To make the most of this opportunity, we need to collaborate even more effectively in the market, and we need to help our customers understand better the full benefit of doing business with HP. That's where our value proposition comes in.

All of us know we face determined competition. Let's take a look at Dell and IBM, because each represents a distinct challenge that we must beat.

On the one hand is Dell; which offers an increasing number of customers relatively low-tech solutions at a low cost, earning high customer satisfaction for their approach. Dell doesn't just compete for the PC market, anymore. It's determined to compete with us in servers, storage and now printers. Dell competes on the basis of low price and high customer satisfaction, but they're a follower in the market, not an innovator.

On the other hand is IBM, which offers customers high-tech solutions, stability and reliability. But they take over a customer's environment without collaborating effectively, their prices are relatively high, and their inconsistent customer satisfaction leaves them vulnerable.

By focusing on Dell and IBM, I don't intend to ignore other competitors like Sun or Lexmark, for example. Companies like these present challenges, but they don't change the competitive landscape. They aren't market makers.

The question is: Why should customers have to compromise? Why should customers have to choose between innovation and price, between functionality and simplicity, between stability and agility, between accountability and flexibility? Why can't they have all this, and a world-class customer experience? Why can't they have high tech and low cost and best TCE?

HP delivers more
Now they can, because with our new capabilities, HP delivers more. With world-class cost structures and focused innovation, and our strategies of best ROIT and simple, rewarding experiences, HP is the company that can deliver high tech, low cost, best TCE. Our job is to deliver reliable innovation at a competitive price, with standard-setting customer satisfaction. This is the value our customers are looking for. This is the value proposition only HP can deliver.

We articulate this value proposition slightly differently, depending on the market segment we're addressing.

To our enterprise customers, we say it's time to Demand More - more accountability, more agility and a better return on IT. Last week HPS and ESG announced a series of changes in our go-to-market model that allow us to collaborate more effectively to win and grow - changes that accelerate our ability to deliver on this promise. And today, as a matter of fact, from this very stage where I'm speaking today, we're launching Adaptive Enterprise, a global, integrated array of products and services.

HP's Adaptive Enterprise delivers on high tech, low cost and best TCE, but it also distills and synthesizes all the lessons we've learned through our own transformation and provides them to our customers. A big part of the power of the Adaptive Enterprise is the fact that we've used our own tools, processes, people and products to transform our own business in the last 12 months. This gives us powerful credibility that competitors can't match.

To small and medium businesses, we say Get More - more reliability, more service and support, more local expertise - all at a competitive price. We can deliver this because we now have a full portfolio of quality products; we boast an expanded network of 300,000-plus sales partners and 70,000-plus services partners in 178 countries; and we offer unequaled innovation that is both reliable and affordable. Altogether, we deliver more, so our small- and medium-business customers can get more.

To our consumer customers, we say Enjoy More - more intuitive, more rewarding technology experiences. Now more than ever, consumers are looking for ways to meet enduring needs for connection and enjoyment, self-expression and achievement. Our technology empowers them. Compared to the competition, our consumer products are radically simple and work better together.

Our goal is to extend our lead in every product category in which we compete, and to build and lead in new consumer categories like digital imaging, digital entertainment and mobility solutions.

Last week, we showcased our solutions, our product design and our strategy to our retail partners. The people in the room represented 20 percent of HP's total revenue. I met with lots of them. I can tell you they were very, very impressed with what we delivered.

Extending into the community
Demand More. Get More. Enjoy More. We can say that now because HP delivers more. In many ways, HP's value proposition transcends the consumer, SMB and enterprise markets and extends into the communities where we live and work. I'm talking about our commitment to Global Citizenship - to protecting the environment, to shaping public policy, to helping those in need.

Let me give you a couple of examples. For several years now, we have been working to help bridge the digital divide around the world. We've created digital villages, or I-communities, in underprivileged and underserved communities around the world. For example, we recently celebrated the third anniversary of our collaboration with the community of East Palo Alto, here in California. One result of this collaboration has been the creation of a Small Business Development Initiative, creating 150 new jobs and generating more than $2.75 million dollars in revenue for the community.

In South Africa, we are sponsoring a digital village in Mogalakwena, where nearly three-quarters of the people currently earn less than a dollar a day. Our I-community in India is also beginning to receive worldwide recognition. In all of these communities, we do more than commit money and products. We commit the time and energy and the passion of our people - and that makes all the difference in the world.

These efforts - and others like them - are fundamental to HP's value proposition. We've always believed that doing good and doing well go hand in hand; that we can both prosper and make the world a better place.

In all its dimensions, our value proposition both drives our execution today, and will continue to inspire us for many years to come.

We deliver useful and significant innovation at a price our customers can afford, with an experience that sets us apart. All of us, no matter what our role, can make a contribution.

I truly believe that our greatest challenge now is to capitalize on all that we have built, and all that we have. That is not to say that everything is perfect. We all know that's not true. We have a lot of work left to do. But great companies - market makers and market leaders - look in the mirror and see the whole reflection. They see the areas that still need work, but they see equally clearly their strengths and unique capabilities. Now, together, we must take all that we have, and all that we are, and deliver with confidence.

So let's remind ourselves of the priorities that we set for this fiscal year. Go on the offense. Focus on collaboration. Come together as one team. Strong economy, weak economy - it doesn't matter. All of our competitors are playing on the same field. It is how we compete, and how we sustain our momentum, that will determine whether we win.

Much to celebrate
So on this anniversary, we have a lot to celebrate. We celebrate the road we have traveled together, over this past year. We celebrate the road ahead, in all its potential. We celebrate who we are and what we stand for, as people and as a company.

Today, I offer thanks and congratulations for your tremendous work over the past year. Against doubt, against the odds, and against a mountain of work, the people of HP have persevered, and I have never been more proud. Together, in 178 countries around the world, we have laid the foundation of our own success. Together, we will continue to prove that with HP, everything is possible.

Happy Anniversary.

Carly