It is really a tough act to follow Rich Sevcik after such an upbeat presentation of our computer systems strategies. I am sure you are as excited as I am about our present and future product offerings. It is wonderful to see the strength and robustness of our HP 3000's. 20 years after it's birth this system still is in a class all by itself. It's scalability, connectivity, ease of use and price performance continues to be an industry leader. And, with the introduction of our new and very successful Corporate Business System, this is more true than ever. With our newly recruited data center oriented partners and it's strong poxis compliance, it is becoming the mainframe alternative of choice. Our success with our UNIX-based multiuser systems continues to be spectacular. So far this year in the Americas, we are running at a 42% growth compared with last year, and this comes after two consecutive 50%+ years -- way ahead of the industry average in all these years. And, as Rich mentioned, we are adding more applications every day, so that we can provide the right solutions to solve your business problems. Our workstation order sales, so far this year, are also ahead of the industry average. Recently we have introduced to the market, powerful, low cost workstations (under 5K), and began using new distribution channels to make it easier for you to get these products. So, thanks to all of you for your confidence in HP. However, the secret of our success has been our commitment to our customers and to do anything we can to meet your expectations. Your trust and confidence is one of our most valuable assets, and I would like to do whatever is necessary to maintain it. It is no secret that our industry is going through very difficult times and, although we are doing better than many others, it is also becoming increasingly more difficult to achieve that objective. However, it is precisely in difficult times when we must redouble our efforts and find creative ways to give you the best level of sales coverage in the industry. This is my pledge to you. As you can see, we are making significant investments in providing you with the latest and most powerful technology at an industry leading price performance. We want to ensure that we protect your investments in HP products and services and, above all, that you feel delighted in your partnership with HP. It is about this last part that I would like to dedicate my presentation. I want to speak candidly to you this morning about the way HP communicates with you, now and in the future. You are our best customers. You are very important to us. Yet lately, some of you have not been as happy with the sales coverage you are receiving as in the past. I take personal responsibility for addressing this problem, and I am going to tell you today the steps we are taking right now to improve things for you. Recently, I have been receiving comments from portions of our customer base - many of you in this room today - that our ability to service your needs as a sales organization has been declining. This concerns me. HP has always been considered one of the best companies to do business with. We have received input from many sources, including letters, Customer Advisory Councils, and various surveys that tell us something is wrong. The Interex Strategic Concerns Survey has been particularly helpful in pinpointing problems. In May, HP sent our annual Customer Satisfaction Survey to over 9,000 customers soliciting feedback on sales interactions, among other issues. Since "sales interactions" falls squarely on my shoulders, I want to share with you some of the feedback we have received. Frankly, some customers are concerned that we are reducing or changing our sales coverage to their organizations. Some don't see their friendly HP rep as often as they used to. For others, the primary sales contact point changed from a face-to-face sales rep to a telephone-based sales rep, and they wonder if HP has lost interest in them as customers. I assure you, we have not! Still others, like this customer comment points out, are mainly concerned with a lack of consistency when interacting with HP. Slide 2 "I would like to keep the same sales representative for more than six months. have had at least seven (I'm starting to lose track) different representatives since 1988." Some customers, like this one, have pointed out the negative impact that some of our internal business processes and systems have caused. The tough economic climate that we all live in led us to reduce some of our resources in the field last year. Unfortunately, we discovered that some of the imperfections in our processes that provide things like product configurations, quotations and invoices had been partially masked by our hard working people. As a result, we have had to accelerate our efforts to improve these key business processes. More on that later. Slide 3 "It takes too long to get a quote. It should take several hours, not a week or more!" Happily, not all comments received were as negative as these first two. Slide 4 "Very personalized service and responsive best describes our sales representative. Even though we're not a large account, we feel very grateful." This customer's comments, for example, describes the kind of feeling that I believe all of our customers should have when interacting with HP. HP has always prided itself with hiring excellent people that are dedicated to performing their jobs well. And I am convinced that, given the appropriate support and organizational infrastructure, our sales force can deliver this level of satisfaction to all of our customers. Providing this kind of "customer delight" is my vision for the Computer Systems Sales Force in the Americas. But we still have a ways to go to achieve this vision. Slide 5 "In our view, HP is going backward in its business relationships with customers." This input from an MIS Director states just how far we are from achieving our customer satisfaction goal with some of our valued customers. Having earned a reputation over the years for being a company that cares about it's customers, this final customer quote deeply concerns me. I am fully committed to achieving our vision for the sales force. Much planning and hard work has been done over the past few months to begin addressing the issues you have raised. Thanks to your comments and feedback, we have been able to focus our energy in the 3 areas most critical to successfully partnering with you. We will work to: 1) Improve the primary sales interface with you our customers 2) Enhance our communication with all our customers, and 3) Improve our key business processes that directly affect our relationship. Let me spend the next few minutes reviewing the programs that we have put into motion in each of these areas. I am really excited about the step that we are taking and I hope you will agree that our efforts are focused in the right direction. The first step involves refining our sales organization structure to better serve your needs. Positive changes will be made to improve our responsiveness for all of our customers - from the largest to the smallest. In fiscal year 1992, we enhanced the focus of the sales teams that are dedicated to some of our largest Global and Major Account customers. This was a natural extension of the programs we have had in place for years, and continues to be highly successful. Through this structure, we have been able to satisfy the business needs of our largest customers and at the same time, strengthen our expertise in applying IT solutions into certain industries. Beginning on November 1, we will expand on this notion by organizing the sales force that covers all of our largest (or named) accounts into industry aligned business units. For example, all sales teams across the U.S. that have account responsibility in the Automotive Manufacturing industry will report into a single executive. By focusing nation-wide efforts in this manner, we will be able to bring greater value to our customers in each of our focus industry areas. Customers and industry analysts are really enthusiastic about this direction . . . and we are too! I believe that the next part of our plan represents one of the most significant changes you will see next year. That is, how we are organizing our resources to better reach all of our other customers - those highly valued customers, many of which are members of our loyal installed base. In FY92, we segmented our sales force covering these customers into 2 parts, reporting into separate sales managers. Depending on sales volumes, geographic proximity to our sales offices, and the type of sales assistance required, customers were assigned either a Direct (face-to-face) Sales Rep or a TeleSales Rep. Both Direct Sales Reps and TeleSales Reps can do a superb job of meeting a particular customer's needs, but only if the customer is made aware of who is calling on them and how best to utilize that resource. And, for some customers we didn't do a very good job of communicating our sales strategy. This accounts for some of the frustration that you saw in the survey quotes earlier in my presentation. Slide 6 Integrated Sales Teams Beginning on November 1, the sales force consisting of both Direct Sales Reps and TeleSales Reps will be pulled together under one roof. These resources will function as an Integrated Sales Team, reporting to a common manager. I think you will see significant advantages to this new model. - Direct Sales Reps, who visit you at your business can take the time to understand complex problems and help devise solutions. But since they can only make a limited number of calls per day, and are away from the office most of the time, they sometimes have difficulty in resolving many small problems in a timely fashion. Plus, they can effectively service a relatively small number of customers. - TeleSales Reps, on the other hand, spend most of their time in the Sales Center office. This makes them much more accessible to you. They can handle many inquiries and typically resolve small problems much more quickly than a Direct Sales Rep can. The beauty about the Integrated Sales Team approach is that you will no longer be faced with an "either/or" choice. We will determine a sales team strategy tailored to meet your needs, drawing from a mix of telesales and direct selling resources, as appropriate. And further, we recognize that some customer needs are best met by a Value-Added 3rd party sales force, due to unique solutions or specific expertise that they can bring to the table. In these situations where you have chosen the VAB as the primary sales contact, the HP Integrated Sales Team will play a supporting role, as needed. The key thing to remember is that with the new organization model, customers will have well coordinated access to all the necessary HP sales resources, including Direct and TeleSales. While I'm on the subject of Telesales, let me take a moment to share with you a letter that we received from Peter Evans, the Director of Data Processing at Buie Corporation, in San Diego. Like many customers, Mr. Evans was very concerned about becoming a "Telesales account", thinking "How can a person that primarily communicates to me over the telephone possibly understand my needs as effectively as a direct Sales Rep?" Well, here is the answer in his own words... "For the past couple of years, I have been working with one of your salesmen, John Goette. I will not hesitate to tell you that when I was first informed of this telesalesman concept versus a direct salesman, I was unhappy. In no uncertain terms did I relay this information to John. He simply asked me to give him a try and see how it worked. To make a long story short, I did give it a try and have been utterly shocked at how well it worked. I have never had a man work harder for my account than John has done. He has resolved many little picky things where other HP people have dropped the ball. In no instance has he failed me. He is directly responsible for accomplishing many of the tasks that had to be executed for a smooth running of my data centers. For this I am truly grateful to him. John is the kind of employee that Hewlett-Packard is about." Well, from this letter and many others like it, it appears as though "telesales versus direct sales" is not the issue. Good old fashioned service is. And, when we execute well, we can provide high satisfaction, which is our overriding goal. Many of you may be thinking to yourselves, "The changes that HP is planning look good overall, but not if my primary HP sales contact changes again as a result." Well although I cant' guarantee that every sales rep to customer assignment will remain unchanged, I can tell you that preserving the consistency of the sales interface to you is the number one "ground rule" as we move into implementation of our deployment plans. Now to round out the Integrated Sales Team concept, let me briefly mention HP Direct. HP Direct, for those of you who are unfamiliar with it, refers to the HP Computer catalog and 800# direct ordering program. I have seen recent articles that stated that HP Direct has been discontinued. This is not true. We have refocused HP Direct towards computer system and workstation products. In May, we published the new Business Computer Systems Catalog which joined the already popular HP Apollo Direct Workstation catalog. HP Direct is alive and well and ready to serve you. By dialing one 800#, you have immediate access to literature, catalogs, up- to-date pricing and availability status, and over the phone ordering. Technical support engineers are available to answer your questions and make it simple to buy low cost and low complexity products such as add-ons and upgrades, as well as provide referrals to our host of Value Added Business partners.. Slide 7 HP Direct (800) 637-7740 And, HP Direct is an integral part of the integrated sales team concept I have been talking about, so the same terms and pricing discounts that you receive from your local HP sales office applies to HP Direct orders. And full compensation will go to your Direct Sales Rep and Telesales rep for all orders placed through HP Direct. So, I encourage you to use this convenient service. While on the subject of service, I would like to help you understand the ways in which our support team is organized to better respond to your needs. We have been ranked #1 in customer support and our objective is to continue this position. Our support organization has been transitioning this last year to better align its resources to serve you and as a result, you may have experienced some disruption. The Professional Services Organization provides upfront, sales support, technical consulting, education services, and migration to Open Systems. The Systems Support Organization now provides the single point of contact for all maintenance services for hardware, software, and networks as well as an expanded range of site services including cabling, disaster protection, and outsourcing. The Response Center continues to be the backbone to provide remote support and Helpdesk. We have 2 major initiatives underway to enhance the Systems Support Organization's ability to provide this single contact. * First, we are investing heavily in retraining our Customer Engineers to provide the full range of maintenance services at the level of expertise you expect, and second . . . * We are in the process of bringing Systems Engineers into this organization on a permanent basis to augment the Customer Engineer's experience. Our support team is fully integrated and able to respond to your needs with an expanded range of services and support offerings. Be sure to visit our HP Support Booth and talk with the folks there. Now let me switch gears a bit. I'd like to talk about Step 2 of our action plan - Communication. It's one thing to have a good sales strategy. . . it's another thing to communicate it properly. From what I have seen, we did a relatively poor job last year in letting you know how we intended to serve you. For example, I know of some customers that were not informed of a change in primary sales contact until well into the year. So for a few, it was not a matter of "giving TeleSales a try", as much as it was "does HP even care about my business anymore?". I apologize for that. This year, I want to ensure that we don't commit the same mistake. Thus, we will be sending a letter to our installed base customers, which clearly articulates our strategy and informs you who your integrated sales team members are. By the way, I should remind you to fill out a Customer Profile card at the desk in the main registration area. These profiles will greatly facilitate the process of keeping you informed. And finally, if you ever have a question and don't know exactly where to turn to, simply call the HP Direct 800 number to reach an HP person who can help answer it. This 800 number is your "one-stop" window into HP. In addition to informing you of our sales strategy and team players, our Customer Contact Plan for the coming year is designed to help keep you better informed of our new technologies, strategies, products, and key events. Slide 8 Customer Contact Plan - Strategy and product communication - Technology Update Series - Interex Advocacy Process - Increased presence at local Interex Users Groups Let me now talk about the various components of our Customer Contact Plan, shown on the slide you now see. Many of you currently receive HP Computer Update. We will continue to enhance this publication as a major communication vehicle for our installed customers. Computer Update is a monthly snap-shot of HP products, promotions and events. Based on your feedback, we recently began including HP management articles on our strategies as well. We are investigating other ways to provide more value through our marketing communications. We have received positive feedback from our use of audio-conferencing. We believe this may be a good format for sharing latest technology development, new products and HP strategies. We plan to develop a quarterly technology series to help you stay abreast of the many changes that are occurring in our fast paced industry. We will discuss specific technologies and help guide you on when to deploy the best alternative for your needs. The Americas Marketing Center has been formed with the responsibility to coordinate our various marketing activities. Our goal is to communicate with you based on your particular business focuses and needs. Your specific customer profile information will help ensure we do a good job at this. For a prosperous business relationship, communication must flow well in both directions. So, besides talking about how HP will communicate with you, I would like to talk about enhanced ways for the Interex community to communicate it's needs to HP. Last month I had the pleasure of meeting with Chuck Piercey and Jane Copeland, Chairperson of the Interex Advocacy Committee. I encourage you all to avail yourselves of the Advocacy process being put in place. I will be at the Advocacy Forum on Thursday and look forward to getting an even better understanding of your current key issues. Since the Advocacy process will help both customers and HP by providing a clear channel in which to distill the most critical problems, we will be using the Advocacy Committee as a sounding board to help fine tune our plans. This Interex conference in New Orleans is an excellent way to keep the communication channels open in both directions, and I am really glad to be a part of it. Since we are so interested in what you have to say, we have set up an "HP Is Listening Booth". I encourage you to stop by during the conference and let us know your concerns and good ideas. Finally, let me make a brief comment on the last bullet on the Customer Contact Plan slide. We will be increasing our presence at all the Regional Users Group conferences next year. This will improve our ability to be responsive to more localized concerns, as well as the strategic issues raised at conferences like New Orleans. Now, let me talk about Step 3 of our action plan: the topic of improving our business processes. Slide 9 Improved Business Processes As I had indicated at the beginning of my presentation, some of HP's internal business processes have become inhibitors to doing business effectively. Things like producing timely configurations, quotes, and invoices are not currently running as smoothly as we would like. As a result, quality improvement efforts to address these areas have been launched at the executive level within Hewlett-Packard. Let me briefly touch on the progress we are making in some of these areas. These process improvements will enhance the sales interface to you by freeing up much of the sales rep's time from the administrative follow-up currently required. The sales team can then spend more time understanding your business needs and proposing solutions. - In response to your feedback for simplified ordering of support contracts, HP has invested in an intelligent front-end bundler for maintenance support contracts. Just introduced this month, this service provides one single contract, customized to each individual customer, that covers hardware, software, and network maintenance services. It is called: HP System Support. - To help simplify system ordering, an artificial intelligence based tool is under development that will greatly increase the speed of providing accurate budgetary quotes on all CSO products. In addition, it will contain automated configuration features which will ensure that entire system configurations are correct and functional when they arrive on your site. The first release of this tool is targeted for late summer of next year and is eagerly anticipated by our sales force. - Other aspects of order fulfillment are being addressed by a corporate-wide program named EAGLE, which places top level attention on the problem in a similar manner to our much renowned "10X" hardware quality program. Noticeable process improvements are expected in 1993 and beyond as a result. To summarize this morning, we have been listening to your inputs and are acting upon them. Slide 10 Summary - Integrated Sales Teams - Customer Contact Plan - Improved Business Processes I am particularly enthusiastic about our sales deployment plans for next year, including the Integrated Sales Team concept. I think you will find the sales teams highly responsive and focused on your needs. In addition, things like the Technology Audioconferences and focused mailings will help keep you better informed. Finally, our dedication to listen to your concerns and needs, communicate our plans and take appropriate action will mark the way we want to do business together with you. In closing, I would like to share a few more comments relating to the quality of HP's sales interactions, as seen by our customers responding to the Customer Satisfaction Survey... Slide 11 "Most professional, helpful, courteous sales staff I deal with (and we have SUN, DEC, DG equipment). Always follows through on what he says he'll do. Slide 12 "He is the best HP Sales Rep I have had contact with in 20 years." It is clear to me from these comments, that we clearly have the skills to perform well for you, once we pull together the right resources and execute well. Closing: Slide 13 "I couldn't ask for better service!" My aim is to build a sales organization that can earn this kind of reaction from all our customers. Obviously, it won't happen overnight. But I am convinced that if we keep the communication channel open and continue to work hard on the issues that you raise, we can do it. That is my personal commitment to you. Thank you for your attention. And thank you for your attendance at this Interex conference. I hope to talk to many of you during the week as we continue to listen to your needs and work together on solutions.