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Hewlett-Packard today announced a sweeping set of management changes in its enterprise hardware group in a much-needed move to better align the company's overall strategy since it acquired Compaq one year ago.

HP has created a new business unit called Enterprise Storage and Servers that will be headed by Senior VP Scott Stallard. The company previously had separate groups for its Business Critical Systems, Industry Standard Servers and Network Storage products, but has now brought them together under one executive. Stallard will continue to report to Peter Blackmore who runs the Enterprise Systems Group at HP.

HP has also started a new Business Management and Operations group and appointed Howard Elias, former head of storage, to oversee this division.

Sadly, Mary McDowell, current head of Intel-based servers at HP, will take a short sabbatical, but she plans to return as a senior vice president, HP said. McDowell is always a pleasure to talk to, so we hope she does indeed come back.

All of these changes point to a recognition on HP's part that it needed to better align its product strategy.

"The various system groups at HP may have made nice with each other in public since the merger," said Gordon Haff, an analyst at Illuminata . "But time and time again, you see an Industry Standard Servers strategy and a Business Critical Systems strategy and you wonder if the merger was just a bad dream that never actually happened because the two strategies certainly appear to be from different companies."

A number of analysts charge that HP's different business groups gave mixed messages about future product directions. The old Compaq folks, for example, had a thriving Xeon server business and have been reluctant to even mention HP's high end Superdome system, which has been part of the Unix group. While Superdome is still only available with HP's own PA-RISC chips, it will soon ship with Intel's Itanium 2 processors, making it a natural extension of the Compaq group's Xeon servers.

So, all of the server groups within the new HP should have been hawking Superdome for some time.

"This reorg looks to be a determined attempt to create the sort of integrated product line that Compaq itself always lacked after its Digital and Tandem acquisitions," Haff said. "But common executives don't automatically create common cultures. That's going to be the tough one."

"If things still aren't fixed 6 or 12 months from now, maybe someone else will be going on sabbatical."

HP's hardware business has been losing money hand over fist, and the company is working to correct this through layoffs and other cost-cutting measures. This reorganization appears to be another attempt at bringing the hardware business back to profitability. ®

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