The Hewlett-Packard Co (HP), the computer industry juggernaut left after the merger between Compaq Computer Corp and HP, said yesterday it would not abandon any of its manufacturing partners in Taiwan, though analysts doubt the promise will last, as the company moves to cut costs.
Executives also said that the company would account for a staggering 10 percent of Taiwan's exports this year, buying US$14.5 billion in computers, notebooks and servers from the nation's top manufacturers, including Quanta Computer Inc (廣達電腦), Compal Electronics Inc (仁寶電腦), Inventec Corp (英業達) and First International Computer Inc (大眾電腦).
As two separate firms last year, Compaq purchases from Taiwan amounted to US$9 billion while HP bought US$5.7 billion worth of goods.
After the merger, HP is now second only to International Business Machine Corp (IBM) in terms of revenue and scope of business, with combined sales of US$78.8 billion last year.
Company CEO Carly Fiorina has said the company expects to cut costs by US$2.5 billion in fiscal 2003 and US$3 billion in 2004, including slashing 15,000 jobs by the end of the company's fiscal year in 2003.
To garner such savings, analysts and executives at Taiwanese high-tech firms have said HP is squeezing margins to drive down its per unit costs on all computer hardware purchased here.
There has also been rampant speculation that the merged firm would consolidate orders to just a few Taiwan partners instead of the dozen or so currently on its procurement list. Stock prices of some companies have rocketed and fallen due to such speculation.
"Going forward, we're not changing the partner list of the two companies," said Alex Gruzen, senior vice president of the notebook computer group at HP, referring to the partner companies Compaq and HP have worked with for years.
* HP executives offered assurances that local manufacturing partners would not be abandoned.
* The company says its purchases from local manufacturers would acount for 10 percent of Taiwan's exports this year, totalling US$14.5 billion.
* HP plans to source 4.5 million notebook computers from Taiwan this year.
"In the future, some will ramp down and others will ramp up and over the course of time, [local manufacturers] will all have a chance each quarter to win our business," he added.
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Taiwan is the world leader in notebook computer production. Analysts believe the nation will produce around 60 percent of the notebook PCs sold worldwide this year.
Industry insiders also say there have been major changes in procurement that have caused some companies to lose orders and sales.
"[But] if what Mr. Gruzen says is true, [these companies] will have a chance to win back that business," said one analyst. She said HP most likely does not want to put companies out of business by consolidating orders since the fewer manufacturers there are, the harder it is to negotiate price.
A few major changes will take place in the product offerings HP puts out. HP brand name business notebook and desktop PCs will be phased out in favor of Compaq's, while the consumer lines will remain the same.
The Compaq iPaq will become the HP iPaq and will be the only PDA offering from the company in the future.
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