HP Counts on Servers, Software and Services

Hewlett-Packard wants to tighten the ties between its servers, software and services as one way to ensure a return to steady growth.

Hewlett-Packard Co. says its getting down to business.

Senior executives from the Palo Alto, Calif., computer giant, including its recently-appointed CEO, Mark Hurd, converged in New York on Tuesday to lay out the companys plans for its fiscal year 2006 and beyond for financial analysts.

Hurd, speaking to an audience of financial analysts, said it aims to move forward from its rocky recent past in part by taking a dose of its own medicine.

As part of a strategy to continue lowering operating costs—last July the company said it would cut 14,500 jobs—HP will roll out a new internal information technology infrastructure, which he said could cut costs in part by automating many functions, serve HP with better customer data through improved information-mining capabilities and also stand as a model of the capabilities it can offer corporate clients.

Overall, HPs plans focus on more tightly integrating its hardware, software and services. By doing so, HP believes it can latch on to the meat of a trend whereby it said companies are moving away from mainframes toward corporate data centers based on less expensive servers.

It also has designs on high-end corporate printing and it aims to cement its position in the personal computing space by offering businesses lightweight notebooks and handhelds that can stay constantly connected by tapping wireless networks, including widely available cellular data networks.

/zimages/1/28571.gifHP hones management tools. Click here to read more.

Together, the company believes the three areas of focus are its ticket to future growth.

"These market trends are gong to happen with or without HP," Hurd said. However, "I believe they do play to our strengths."

Hurd, who was appointed as HPs CEO in March, also has the job of reinvigorating HPs employees.

Hurd spoke frankly about his first few months on the job on Tuesday. He characterized HP as an inconsistent performer and said he gave the company mixed grades at first.

Aside from its financial ups and downs, it had good products, well-known brands and loyal customers, when he started, Hurd said.

But customers told him they felt it was hard to do business with the company, due to a lack of accountability in some areas and slow decision making, he said.

Although he added that both HPs employees and its customers wanted the company to succeed.

"While I found [employee] morale to be mixed, I found something that I didnt expect: a company with people who wanted to improve the company," he said. "People who wanted to go win."

Indeed, despite continued attacks by rivals such as Dell Inc., IBM and Sun Microsystems Inc., HP has made progress in several key areas including its PC business, righting its storage systems product line and bringing its software business to profitability in the last quarter, HP executives said.

HP CFO Bob Wayman, also at the meeting, forecast that HP would turn in revenue of between $89.5 billion to $91 billion for its fiscal 2006 year, which a report by Reuters said exceeded analysts average estimates.

/zimages/1/28571.gifClick here to read more about CEO Mark Hurds arrival at HP.

Wayman also predicted that HPs revenue would increase by between four and six percent during its fiscal 2007. HPs fiscal year ends in October.

Going forward, HP will seek to devise far tighter relationships between its hardware, such as servers and printers, its software for managing them and the services it offers.

Thats because, not unlike what HP is trying itself to do, most corporations are trying to take down the costs of their IT infrastructures, Hurd said.

Hardware can help to some extent as machines based on Intel Corp. or Advanced Micro Devices Inc.—both of which HP uses in its PCs and servers—processors are relatively inexpensive.

Next Page: Data centers to become more automated.