HP: A Reporter’s Notebook

New York, New York — A city so nice they named it twice. New York City is one of the few places in the world that is truly alive. The people really make this city a living, breathing organism. I’m here to cover the first major public appearance of Mark Hurd, the man who replaced the now legendary Carly Fiorina as CEO of Hewlett-Packard.

Now, it may be billed as Hurd’s first public appearance, but it really isn’t since I saw him on TV at the grand opening of the HP Garage in Palo Alto, Calif. The garage, considered the birthplace of the Silicon Valley, is where Bill Hewlett and David Packard founded the company.

Although this event took place mid-December, I thought readers might like a more detailed look at what happened than we were able to report at the time.

8:05 AM: This is my first securities analyst meeting of any kind. I have to say it is very impressive. There must be more than 700 analysts and press from around the world here at the Metropolitan Ball Room at the Sheraton NY Towers. The room is just jammed with people. It reminds me of a the trading floor of the Hong Kong stock exchange except with a little more wiggle room.

8:08 AM: Hurd isn’t a flashy guy, he just comes on stage and thanks everyone for coming. He says the most common question he has received since joining HP is how he feels about being at HP.

His first impressions of the company can be wrapped up in one sentence. “I would tell you that not everything was good, but also not bad so it was a mixed view.” Clearly Hurd was conveying the obvious. HP results have been too inconsistent for his or his shareholder’s liking.

During his first 60 days on the job, Hurd met with or spoke to 400 customers and partners and this is what he found:

HP has a lot of innovative technology.

The company is very cutting edge.

It has a strong brand, loyalty and support.

There is a desire from customers to see the company win. But, at the same time, HP is a company that is tough to do business with.

He was also told that it was hard to find the right HP people to make decisions and there was little accountability.

Definitely some no-nonsense talk, especially so when this event has been billed as his first public comments since he became HP’s unlikely choice for CEO.

8:45 AM: Hurd turns the stage over to Bob Wayman. Wayman, who had a cup of coffee as CEO after Fiorina’s departure, is the numbers guy at HP. If you were wondering at all if HP is profitable, well it is. In 2005, it earned US$86.7 billion in revenues. A six per cent gross profit with net income US$4.7 billion.

Wayman said the outlook for 2006 is for three per cent growth.

An astonishing 4,700 employees left HP last year. This includes 3,200 early retirees (aren’t they lucky). “I can’t think of what would happen if in one calendar year close to 5,000 employees leave your business because people make any business,” Wayman said.

9:15 AM: It is now time for Hurd to field questions from the audience. He makes his most controversial statement to date and it involves the channel. “All partners are not equal. (There are) partners who take an HP badge product and take an HP part out and use it as service part and then sell it with grey market part. Not very helpful, and to the customer we hold the accountability to that.”

I could tell that not everyone loved this comment, but for Hurd what else can he say? He should be commended for being blunt and to the point.

9:23 AM: Two financial analysts from Lehman Bros and Bear Stearns do some rough math and figure out the share price in the 2006 forecast would be a 2.2-cent increase.Wayman interjects to say those numbers are too rough and not to be believed. It will be at 1.4, he said. The debate continues with these would-be CFOs. Wayman finally says that he does not have a calculator on hand to confirm those projections.

9:45 AM: Ann Livermore comes on stage. When I look at Livermore I see a survivor. She holds a very significant job at HP and she has done it under Lewis Platt’s leadership, Fiorina’s leadership and now Hurd’s leadership.

Livermore tells the audience that the Linux business is very attractive to HP, but it’s a flat business. She also gave this interesting stat: HP shipped ProLiant servers every 14 seconds during the 2005 year. Truly amazing!

10:02 AM: Wayman comes back on stage to clarify the earlier debate on the share price forecast saying it will be a 2.12-cent increase. Money definitely makes the world go round, doesn’t it?

Then Steve Smith addresses the crowd. He is new to HP’s leadership team. He is the senior VP in charge of services. HP services is a US$15 billion enterprise, which nets out more than a billion in operating profit a year. Half the company is employed on this side of the business, which is roughly 69,000 employees in 170 countries. That is some scope for business unit. Smith said HP services are the same size as Accenture.

10:31 AM: Todd Bradley, executive vice-president of personal systems group (PSG) replaces Smith on stage. Bradley is an executive I met many years ago when he was at Palm Computing. During the 14th annual CDN Resellers Choice Awards, Bradley came to our presentation at the old Comdex Canada show to accept the award for best handheld device. It is typical of the shuffling of executives in this industry that Bradley is no longer at Palm during a mere three-year period.

While at PSG, Bradley managed to turn a profit. Notebook sales grew 42 per cent. He said mobility and the ability to easily connect anywhere that is driving the profits.

HP is the No. 1 provider of consumer notebooks and desktop and is increasing its lead over Dell. HP is twice the size of Lenovo and three times the size of Acer, he added.

11 AM: Vyomesh Joshi, the man a lot of analysts speculated would be Fiorina’s replacement, comes on stage to give the audience an IPG progress report.

Joshi comments on how he has enjoyed leadership over Canon and Epson for 21 years at the company. But, he said, the company and its partners need to drive profitability.

Joshi confirms that HP enjoys a $50 premium over competitors’ products. This is something I have written about for years. The brand is perceived to have value over others and for this customers are willing to pay a premium.

He added that competitors are giving away printers, but the installed base wasn’t using the printers they got for free. This, I believe, is a shot at Lexmark.

“The perception is that we are a consumer printing company. We should think about pages and not hardware. We do printing not printers. Think about the trillions of pages we can go after and figure out where and how we can find the growth,” Joshi said.

HP will also go after retail photo finishing but Joshi was short on specifics here. However, I can’t seem them becoming another Blacks any time soon.

11:45 AM: A Q&A with Livermore, Joshi, Bradley and Smith.

It was clear from the start this was the Joshi show and he fielded most of the questions.Joshi said that Dell in the printer market is not making money. “It is not like PCs where they have strong deals with Microsoft and Intel. In printers it is multi-level partnering and they do not have the technology,” Joshi said.

“They do not innovate but repackage,” Joshi added about Dell printers.

This statement is something the channel has tried to tell customers for years. Dell makes stickers – not technology.

Joshi said vendors have to solve customer problems with innovation, while working with partners.

The Q & A ends and it is time for lunch.

1:29 PM: Mark Hurd, Ann Livermore and others meet the press. The CEO starts looking over the group of about 40 reporters by asking: How much can we afford the media?

Steve Burke, editor of U.S.-based CRN, asks Hurd about his controversial claim that some channel partners are stripping out HP components from hardware and insert grey market parts.

Hurd’s answer is very general. He said not all channel partners are the same. They must add value. HP must work with partners to improve geographic coverage. And, then Hurd says he found out about the grey market problems from talking to partners. He added that he does not like it when partners sell outside the boundaries of agreements. He wants to give better clarity on these agreements with the channel so it does not drive up the grey market.

1:35 PM: Burke wants to ask a follow up question, but is rebuked by a PR person who points to a journalist from France for the next question.

1:43 PM: Finally, someone asks Hurd about the Compaq acquisition. Hurd paused and said: “When I get that question I like to resist it because it is irrelevant. I do not worry about what went on two to three years ago. I need to focus on the upcoming two to three years.”

1:57 PM: Asked about spinning off divisions, Hurd’s answer is a flat no. “We are not working on spinning out any businesses such as PCs, printing, servers or services. There are too many leverage points where they add value,” he said. And with that the Q & A wraps up.

2:30 PM: Next up is a roundtable meeting with Ann Livermore and the press. She sits right next to me. I ask her how HP is increasing margins for the channel. Her answer was surprising and to the point. “Increasing margins? It is the channel’s job to increase their margins not HP. We know they are working on those plans (for 2006). We believe if they sell more of the portfolio, that is one of the primary programs on margin expansion.”

Her answer may have been harsh but it is reality. The channel should stop begging vendors to up margins and get them on their own.

3:00 PM: Shane Robison, chief strategic officer for HP, sits down on the other side of the room.

He gets into many topics but the one of interest is the iPod business. He said HP got out of that business because the technology roadmap did not work well for the company. He added that the company would be doing a lot in consumer electronics with digital entertainment products. “We are looking at home networking and we have 17 different models of TVs and a huge range of digital camera. So what Carly talked about we are still doing,” Robison said.

3:30 PM: Todd Bradley enters the room and sits front and centre. He knows what is coming and gives Steve Burke the floor.

“Grey market is not prevalent,” he states. Bradley went on to say that HP spotted some activity and has already addressed it with the partners.

4:00 PM: Final meeting of the day and it is with Vyomesh Joshi, who is a very animated speaker. Loves to use his hands to illustrate a point. I ask him about price per page strategies for printers, which he believes is where the market is headed.

He then goes on about the HP’s Halo project, which is supposed to revolutionize video conferencing. Joshi gives a glimpse of his remarkable travel schedule. It is not to be envied. “I travel 50 per cent of the time. Sometimes I go from San Francisco to London. That’s 11 hours for a two-hour meeting. Then I go back. I’ve lost a lot of hours. This is not just about financial, but the wear and tear on the executive even if you are flying on a corporate jet,” Joshi said.

I can see why he is enthusiastic about Halo.

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Paolo Del Nibletto
Paolo Del Nibletto
Former editor of Computer Dealer News, covering Canada's IT channel community.

Related Tech News

CDN in your inbox

CDN delivers a critical analysis of the competitive landscape detailing both the challenges and opportunities facing solution providers. CDN's email newsletter details the most important news and commentary from the channel.