New HP CEO Won't Rule Out Spin-Offs - InformationWeek

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3/30/2005
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New HP CEO Won't Rule Out Spin-Offs

Some analysts and shareholders have advocated spinning off HP's printing or PC businesses to raise shareholder value. While CEO Mark Hurd didn't dismiss that possibility, he made it clear it's not his first priority.

New Hewlett-Packard CEO Mark Hurd said Wednesday his primary focus will be on execution and creating shareholder value, and he won't rule out spinning off parts of the company to achieve those ends.

In a Wednesday morning conference call with financial analysts, Hurd was asked if keeping HP's portfolio intact was a condition of becoming CEO. "I received no preconditions under the agreement that I accepted the job," he said. "I was not given any commentary that would stop me from doing anything that would be in the best interest of trying to improve and optimize the company."

Also on the call was HP Chairman Patricia Dunn, who added, "We were looking for a CEO whose strategy was to execute the businesses performance to their highest level. There were not litmus tests [concerning a no-divestiture strategy]."

Some analysts and shareholders previously have advocated spinning off HP's printing or PC businesses to raise shareholder value. Though Hurd didn't dismiss that possibility, he tempered his comments by saying, "That's not the first thing I'm going to work on."

Hurd, formerly president and CEO of NCR, said his top priority is to meet with HP employees, customers and partners to gain a better understanding of the company's business.

"I don't know any other way to do it other than to get under every piece of the business," he said. "I'll focus on better understanding each and every one of the operating models and meeting every person that I can possibly meet that can give me insight and knowledge. While the companies [NCR and HP] have similarities, it would be wrong for me to take the formula that I used at NCR, apply it to HP and imagine that it would work perfectly."

Hurd wasn't asked specific channel-related questions during the 20-minute conference call, but he noted that channels and distribution are of vital concern for Palo Alto, Calif.-based HP in competing against IBM and Dell. "You have to make sure you are fully deployed from a channel and distribution perspective to capture market-share profitability in each of those marketplaces, service them and get the margin for that," he said.

Solution providers said Hurd would be wise to review the promises HP executives made to partners at the recent Americas partner conference in Las Vegas and to stick by those principles.

"He needs to look at those messages from Mike Larson [senior vice president and general manager, HP Personal Systems Group, Americas] and V.J. [Vyomesh Joshi, executive vice president, HP Imaging & Personal Systems Group] and fully endorse them," said Don McDowell, executive vice president of marketing and partner solutions at Logicalis, a Bloomfield Hills, Mich.-based solution provider. "Everyone made commitments to the channel not less than six weeks ago."

Among the promises at the partner conference were less channel conflict, tighter rules of engagement and more business going through the channel instead of direct sales.

Analysts noted that Hurd was a results-oriented manager at Dayton, Ohio-based NCR and executives who didn't meet expectations suffered repercussions. Hurd said he wouldn't change his approach at HP.

"I haven't changed my stripes," he said. "In the end, you are trying to drive a performance- and execution-oriented culture, and I can't imagine that there aren't people at HP that don't support that thesis."

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