Hurd Tries To 'Optimize' HP, Not Change It - InformationWeek

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7/19/2005
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Hurd Tries To 'Optimize' HP, Not Change It

While he plans to cut around 15,000 jobs, Hurd isn't making major structural changes to the computer and printer company.

Hewlett-Packard CEO Mark Hurd may have disappointed some analysts Tuesday when he revealed plans to cut around 10% of the company's workforce. Many outsiders expected Hurd, after four months on the job, to significantly restructure the computer and printer company. But other than the headcount reduction, Hurd did little to alter the company's product or business unit makeup.

"I have focused my efforts to date on optimizing HP as it is today," Hurd, who took the reins at HP as CEO and president in March, said during a conference Tuesday. "Making HP today the best HP we can possibly make it is what I have been focusing on."

The changes disclosed Tuesday focused primarily in workforce reductions, with the only business change coming in the Consumer Solutions Group. The group was a standalone unit responsible for sales to large companies, small and medium-sized businesses, and public-sector firms. The salespeople working for the group have been merged into HP's three main product units, Technology Solutions Group, Imaging and Printing Group, and Personal Systems Group.

Frank Gillett, an analyst with Forrester Research, says he believes that Hurd will make a more extensive review of the company in the months ahead. But with the exception of the announced workforce reductions and a restructuring of its Consumer Solutions Group, it appears that the company will go forward with few significant changes.

"He did a quick triage and saw nothing that was worth immediately dumping," Gillett says. "He didn't see anything that was such a disaster that he was ready to pull the plug, and, furthermore, there seems to be an implicit commitment to some of the more controversial products and markets in which they are currently engaged."

The next six to 12 months should provide a better understanding of how Hurd will attempt to better define and differentiate HP as a company as it battles competitors such as Dell and IBM, he says.

"With the difficulties they've had over the last two years in demonstrating synergy after the [Compaq] merger, we've become skeptical about how easy it will be to achieve that synergy, but we still think it is possible," Gillett says. "They need to re-create their identity, which they never quite successfully finished rebuilding after acquiring Compaq."

Carl Claunch, an analyst with Gartner, says Hurd's moves are consistent with the message that has been coming from the HP board for the past year. "The board has been consistent, even before the departure [of former HP CEO and president] Carly Fiorina that they were satisfied with the strategy, product mix, and approach the company was taking," he says. "They were just not happy with the execution."

Hurd's decisions are consistent with his previous management style at places like NCR Corp., where he served as CEO, Claunch says. "He dives right into the details, and doesn't make superficial judgments," he says. "There are lots of examples of companies with diverse portfolios, ... and it's a reasonable strategy where they can deliver value to both consumers and businesses."

HP plans to cut its workforce of 150,000 by around 10%, and the company's IT organization will take a big hit. But Hurd maintained Tuesday that HP remains committed to technology. "We love IT," he said. "We have a long list of projects we'd like to work on, and typically we throw a lot of technology--ours--at the issue. We have to be more selective about the number of projects we put on the plate. This will include taking some work out of the system that we think is not mission critical to the enterprise."

There will be three areas of reduction within HP's IT department, Hurd says. There's work currently being done that can be eliminated, he says, "because it doesn't add value to the enterprise." Second, the company can more deeply automate many IT functions. Third, there are areas of redundancy that can be eliminated.

Taking a hard look at its internal IT effort makes sense considering that HP recently hired former Dell CIO Randy Mott to run its IT organization, Gillett says. He adds that Mott also should be able to help HP significantly improve its customer-facing Web site.

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