Heir to the chairmanship, Mark Hurd stays focused on growth and efficiency.
Two days before becoming heir to Hewlett-Packard's chairmanship, CEO Mark Hurd strides to a lectern at the InformationWeek Fall Conference in Rancho Mirage, Calif., to address an audience of 300 IT executives--and 100 support staff and sponsors. "Wow, a lot of overhead," he says as an aside before taking the stage. Hurd then steps up to a flip chart and draws a triangle marked by three words: Growth, Efficiency, and Capital. They're what HP is all about these days.
As he emerges from a boardroom spying scandal with more power consolidated in his office, Hurd lives up to his reputation as a maestro of metrics with a sharp eye for inefficiency. HP's boardroom is in turmoil over the unethical--and possibly illegal--surveillance of board members' and journalists' phone records to root out information leaks, a lapse that cost board member Patricia Dunn her position as chairman, which Hurd will assume in January. Two other directors resigned--one in protest.
Hurd is turning to Mott, his hand-picked tech leader, to save money and showcase IT smarts
Photo by Sacha Lecca
Yet HP's business is better than it's been in years. Analysts forecast HP will hit $91.2 billion in revenue for the fiscal year that ends Oct. 31, growing more than 5% and eclipsing IBM as the world's largest tech company. Net income could double to $5.7 billion, though IBM is still three times more profitable. HP is gaining ground in PC sales while market-leader Dell grapples with collapsing profits, quality problems, and a federal accounting probe (see story, "Former PC Industry Darling Tries For Comeback As Dell 2.0"). HP's operating profits are growing faster than revenue, as Hurd has extracted $1.9 billion in costs via 15,300 layoffs, benefits cutbacks, and other money-saving measures. HP's stock is up 85% since Hurd became CEO in April 2005, and the company has exceeded Wall Street earnings estimates every quarter in that time.
Act two will be harder. To keep growing and to establish itself as a supplier of business technology more compelling than PCs, low-cost servers, and high-margin printers, HP will need to find new places to cut expenses, so it can plow that money into research and development. Those questions will be front and center as HP opens its biggest IT user conference of the year this week in Houston.
"It's just been an amazing story since Mark Hurd has been there," says Gary Scholten, CIO at Principal Financial Group, a $9 billion-a-year company that manages health and retirement benefits and is a big buyer of HP gear. "The challenge is, so many parts of their business are commoditized now." HP is milking its cash-cow printer business for nearly half of its profits while trying to develop new products such as data center software for managing large groups of computer equipment and more sophisticated IT consulting services. "They're trying to reinvent themselves, but it's going to be a hard road to create value," Scholten says.
That's where CIO Randy Mott comes in. Hurd has identified three major growth areas for HP: managing networks of printers for business clients and getting into commercial printing, selling more laptops and handheld computers paired with better data security software, and selling servers and software that can automate more tasks in corporate data centers. Hurd hired Mott, who appeared with him at the InformationWeek Conference, away from Dell last summer. While at Dell, and before that as CIO at Wal-Mart, Mott scored big with large-scale data warehouses that could help executives spot sales opportunities and better target what customers wanted. Now he's trying to repeat that success at HP.
The company is assembling a 300-terabyte data warehouse on HP's own technology--and not NCR's Teradata system. That's notable because Hurd was CEO of NCR before coming to HP, and Mott has been a Teradata customer in the past. "We only have one religion here--it's got to be Hewlett-Packard infrastructure," Hurd says. Using the system, HP hopes to figure out what accounts it isn't reaching and identify new sales leads at the ones it is. It's hiring hundreds of salespeople to try to cash in on the insights. "His job isn't just to get us lower costs," Hurd says of Mott. "His job is to get us better information to help the company grow."
At the same time, Mott is taking on a radical centralization of HP's sprawling IT operations, consolidating 100 worldwide work sites to 29, cutting IT staff to 8,000 from 19,000 when he arrived, slicing applications in use from 5,000 to 1,500, and collapsing 85 data centers into six. And it's clear he's got support from the top. Says Hurd: "This isn't Randy Mott's IT strategy--this is HP's IT strategy."
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