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HP CEO puts Dell and IBM on notice

Mark Hurd was as hot as the Las Vegas heat at his first channel conference

LAS VEGAS – It was Mark Hurd’s first channel conference as the head of Hewlett-Packard Co. and he chose one of the hottest days of the year in the gambling capital of the world.

As hot as the day was (111 degrees Fahrenheit), so was Hurd at this year’s Americas Partner Conference. He was funny and engaging and a lot better than his first keynote at the financial analyst conference in New York last December.

Speaking of finance, HP has been forecast to earn around US$91 billion for fiscal 2006. According to Hurd, if HP could do better than that projection it would mean a changing of the guard in who is the largest technology company in the world.

Under the guidance of Lewis Platt, Carly Fiorina and now Hurd, HP has achieved 10 consecutive years of channel improvement. “Channel volume, size wise, we are the same size of Dell. That’s good. Did you like that?” said Hurd during his keynote address to more than 1,800 partners.

Last year HP did US$86 billion in revenue of which US$8 billion was profit. Doing simply math that means more than US$75 billion of that revenue is cost, Hurd said.

That means more efficiency and cost-cutting will occur, he said.

Today, HP has aligned its capital and has US$14.2 billion in cash reserves in the bank with virtually no debt.

“I want to align the money to save money and align the money to grow the company,” Hurd said. What he means is that Hurd wants to drive more cost and layers of inefficiency out of HP and reinvest those savings in critical market areas that are growing.

Some of the cost cutting measures are being focused on HP’s IT systems. Today the company has 87 data centres, 22,000 servers and 23 Pedabytes of storage, 280,000 mobile devices and 1,175 active projects. “We are spending a lot of money,” Hurd said.

HP is in year one of a three-year journey to reduce its IT systems down to three data centres.

“This is not a statement on channel direction,” said Hurd about hiring new sales people.

He added that by hiring more sales people he is not making a channel statement, which really is a statement in and of itself.

Hiring more sales people is a portion of the company’s reinvestment strategy. Hurd wants these new hires to create demand for the channel. Hurd said that wherever HP does not have channel coverage its market share goes down. “That’s unacceptable and we are going to fix it. We are hiring hundreds of sales people and it will take time,” he said.

Even with the new sales people, Hurd said the company is still smaller than IBM and even Dell’s call centre.

Price points

A lot of the leg-work had already been done before the conference started. Hurd and his team have managed to be on par, price wise, with Dell. Now if you are wondering how they did this, well it goes back to cost cutting and improved efficiency work. This work has gone beyond just the company’s IT system and has even touched HP’s real estate holdings. These are areas that are not really necessary in improving HP core competencies. With that, they have managed to position HP and its partners, of which 180 are here are from Canada, better from a price perspective against Dell.

Hurd said that Dell still has a great efficiency model. “The good news is we are not that good, but the bad news for Dell is we are getting better. They do not have room to move,” he said.

He added that HP will get even tougher and more aggressive with Dell going forward.