Cutting Costs

By Jeffrey Burt  |  Posted 2005-03-29 Print this article Print

Frank Gillett, an analyst at Forrester Research Inc., said Hurd brings with him many of the skills the HP board was looking for, as well as a straightforward and personable demeanor. "That will go over well at HP, because weve felt that was something that was missing in the previous regime," said Gillett, in Cambridge, Mass. He added that Hurd has garnered substantial executive experience by running the Teradata business for NCR and then being in charge of the whole corporation. "Hes demonstrated the ability to turn around troubled business units and companies, and to make the tough decisions to cut costs," Gillett said.
Its also a nod by the board that—at least in the short term—it wants to keep the company together rather than giving in to suggestions by financial analysts that HP would be best served by dividing itself, possibly by spinning off its lucrative printing business.
However, Hurd is a strong-enough executive to change course down the road if he believes that is no longer the right course, Gillett said. The board over the past several years has considered breaking up the company at least three times, each time deciding against it. "There arent that many companies larger than HP," said Umesh Ramakrishnan, vice chairman of the executive search firm Christian & Timbers Inc., which brought Fiorina to HP six years ago. Ramakrishnan applauded HPs decision to appoint Hurd to the post, saying it would give the company a strong executive with the right operational skills. "If you take the Steve Jobses and Sam Palmisanos out of play, then you dont have a lot of people to recruit. Mark is definitely the right candidate." He said he expects Hurd to make a few changes in the short term, but that he will be patient in assessing HPs needs before deciding on any longer-term changes. The issue of moving to such a large company shouldnt hinder Hurd, Ramakrishnan said. He added that his firm has approached Hurd several times over the past few years inquiring about his interest in other CEO jobs, and each time he turned them down, preferring to stay with NCR. "Hes definitely been under consideration for a long time," he said. Click here to read about how HPs growth goals impacted its search for a CEO. Hewlett-Packards board asked Fiorina to resign after tiring of the companys uneven performance during her tenure. At the time, Dunn said the board was comfortable with the course Fiorina had set for HP, but that it wanted better execution. Fiorina engineered the Compaq acquisition, a controversial purchase that was designed to enable HP to compete with the largest players in the technology industry, and in particular with IBM. The purchase did rapidly grow its portfolio of hardware, software and services, but HP at times struggled to mesh the two companies. It continued to rely heavily on revenues generated by its highly profitable $24.2 billion Imaging and Printing Group, and its enterprise hardware business has stumbled at times. In the third quarter last year, mistakes in a massive SAP AG migration and deep discounting by European resellers led to a $208 million loss for the Enterprise Storage and Server Group. The company rebounded in the fourth quarter, but criticism of Fiorina persisted. Want to learn about HPs crown-jewel printing business? Click here to read more. HPs server business also continues to be squeezed by IBM at the high end and by Dell Inc. in the volume server business, and the storage unit has struggled. The PC business has been in tight competition with Dell Inc., of Round Rock, Texas, and HP Services must compete with IBMs massive global services business. Despite the criticism, Ramakrishnan said he considered Fiorinas tenure a success. "Carly did what HP wanted its CEO to do," he said. "They wanted her to actively come in, rock the boat, make sure the old, intellectual HP was changed, and she did that. Unfortunately, the economy hiccupped and Carly couldnt complete her work." However, its given Hurd a solid base from which to work, Ramakrishnan said. Another challenge for Hurd will be dealing with executives who have been passed over for the CEO post. Vyomesh Joshi, executive vice president of the Imaging and Personal Systems Group, and Ann Livermore, executive vice president of the Technology Solutions Group—which includes enterprise hardware and services—both were considered strong candidates for the top job, and both run businesses that are bigger than NCR. Hurds appointment could mean that one or both of them will leave HP in the future. Livermore had been considered a candidate for the CEO job before Fiorina came on board in 1999. Both Ramakrishnan and Forresters Gillett said Hurd will rely on Joshi and Livermore once he comes on board, and that it could be in their best interest to stay with HP, at least in the short term. "With Mark, they have a chance to fix it, then move on to another company," Gillett said. Editors Note: This story was updated to include information and comments from analysts and Hewlett-Packard officials. Check out eWEEK.coms for the latest news in desktop and notebook computing.


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