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10/18/2005
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HP CEO: Company To 'Double Down' On Core Products

Hurd pledges the vendor will continue to concentrate on servers, PCs, printers, and management software; don't look for a printer spinoff anytime soon.

Hewlett-Packard will not, as some continually predict, spin off its coveted printer business, nor will the company dump PCs in the face of Dell's cheaper-computer onslaught.

Seven months into his tenure at HP, CEO Mark Hurd pledged that the company will "double down" on its core areas: servers, PCs, printers and management software.

"When I first came [to HP], I got a lot of questions about spinning off printers. We're not working to get out of the printer business or spinning it off or divesting it. That's point one," Hurd told several thousand IT and C-level executives Tuesday in a keynote speech at Gartner's ITXpo conference in Orlando, Fla. "Point two, you'll see us return to fundamentals. We're getting our cost structure in line, simplifying the organization. We are leveraging our core. We have tremendous technology and core assets. We're in the server business, we're in the printer business, we're in the management software business. You'll see us double down in those businesses. We'll ship 50 million printers, 30 million PCs, a couple million industry-standard servers. That's in one year.”

"Doubling down" seems to be a favorite concept for Hurd. Earlier this year, he said the Palo Alto, Calif., IT giant would double down on its top partners that sell total HP solutions, giving them preference over solution providers who sell less HP product and services.

Asked by Gartner analyst Carl Claunch if HP would pursue a product-agnostic services business, or task its service personnel with selling HP wares, Hurd straddled the issue. "To a degree, we'll be very, very focused on services. The strategic debate is how far up the stack we go," he said. "We're focused in services, IT outsourcing and partnering to bring the full solution."

Hurd added, "When you hear the term BPO or business process outsourcing, that's a very broad category and could include outsourcing your human resources work. Like it or not, we're technologists at heart. We're not executive compensation consultants."

Responding to audience laughter, he said, "That may be a surprise to some people."

HP has laid off some 14,500 people in the past year even as it has made some IT acquisitions and hired people in key areas, a practice he defended at the conference.

The services agnosticism question plagues IT companies like HP, IBM and Oracle, all of which field extensive services organizations. The issue is how much these in-house integrators would pitch a rival solution, even if it is a better one.

HP purchased Novadigm and Consera last year and more recently snapped up Peregrine Systems to bolster its OpenView software management portfolio. And last month, HP bought AppIQ for its SAN and storage resource management know-how.

"We are taking costs out of some areas and we are buying, but in places where we need to invest,” Hurd said. “With Peregrine, we're trying to expand our management suite. With AppIQ storage management, we're buttressing management and blades expertise."

If HP partners haven't already taken note of Hurd's public statements about expanding HP's footprint in existing customer engagements, they should now.

"We have a tremendous asset in our customer base and haven't done as good a job as we think we can in understanding the aggregate customer experience. If we're not careful, they will look at our three product streams separately, but customers can touch all of those things,” Hurd said. “We have to look at customers on a several-to-one basis so we can do more services, upselling and cross-selling."

Gartner analyst Leslie Fiering asked which current HP businesses might not be "core" going forward. "If there's something I didn't want to continue, I probably wouldn't bring it up here, but I appreciate your concern," Hurd quipped.

Citing an example, however, Hurd said, the iPod "was not a very interesting excursion for us." Last year, HP OEM'd and labeled Apple’s popular music devices but later dropped that deal. "For us, taking a product and putting our logo on it and shipping it doesn't change anything for us. In some cases, we were scotch-taping 10-dollar bills on it. Category-hopping is a different strategy than doubling down on our core. AppIQ is different from getting into iPods," he said.

But Fiering pointed out that HP is now in the TV business, something that many may not consider core. TVs, Hurd responded, "leverage the buy we get from the PC business. When you can leverage the cost of goods sold, that's good. That's how the TV decision gets made. Some adjacency makes sense."

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