More stringent trading terms and conditions, including less soft dollars and tighter credit control than Compaq offered, will be implemented following the channel review currently being undertaken by the post-merger HP.
Tony Bill, general manager of HP's personal systems group, told ARN last week new contracts will accompany a channel rationalisation, which is due to be finalised in October and executed on November 1.
Debtors' account terms, customer management and rebate schemes utilised by the two pre-merger companies were vastly different. HP previously provided early payment discounts whereas Compaq did not. On the other hand, Compaq was very generous with rebates and outstanding accounts, unlike HP. The challenge is now for the two to be integrated without upsetting channel partners, Bill said.
"The new terms will be a combination of the two," Bill said. "I am currently working on the first iteration of the consolidation. Some areas where HP has better terms and conditions in regards to early payments will be adopted.
"Meanwhile, Compaq maybe had some better market development funding programs available to the channel, and it is most likely they will be adopted."
Bill confirmed the hybrid model to emerge would be tougher, and hinted there would be a tightening of 60-day credit terms previously tolerated by Compaq.
There was no denial either about rebates being under threat. "I don't want to skirt the issue," he said. "We as a company need to rationalise our soft dollar program. We need to ensure it is affordable but also that it drives the right behaviour within the channel. So we will find a middle ground, which won't necessarily be the most generous parts of both pre-merger co-op programs.
Bill said all distributors will have to sign new supply agreements when the rationalisation is complete and that there will be a month's warning for those who do not make the cut in the new channel structure.
"All the distributors are astute to the fact that we have too many of them," he said. "They see that as a reality. Currently we have over 50 direct resellers and eight distributors in the Australian market and I believe that is too many, so that will be consolidated."
For the full story read this week's issue of ARN (July 3), out now.