HP reaps rewards of CEOs past and present
Published: 04 Sep 2006 12:35 BST
on the high-end servers market with its Power-based systems. After slashing HP's headcount in the middle of 2005, Hurd has turned his attention to this market, adding companies such as Peregrine Systems and Mercury Interactive to its software division.
In the PC and server market, HP has had more success. Its decision to bet heavily on AMD's Opteron chip in 2004 has allowed it to maintain its leading market share position and differentiate itself from Dell, which only this year caved in to the pressure to use AMD's chips. HP's low-end server revenue grew 6 percent during the quarter, while Dell's only increased 1 percent.
The company's PC division became consistently profitable in 2004, and a shift in PC buying patterns to retail outlets has allowed HP to enjoy greater success in recent quarters. It still trails Dell in PC market share, but Dell has been forced to cut profit expectations in part because it has captured too much market share at the unprofitable low end of the market, company executives have said.
Suddenly, Wall Street likes the stock again. HP's stock has outperformed the Dow Jones index, the Nasdaq, the S&P 500 and the stocks of its three major competitors (Dell, IBM and Sun) in the years since the merger. Even though Compaq's businesses are helping HP to compete, the rise in the stock has dovetailed with the arrival of Hurd.
There's finally a sense within HP, according to analysts and employees, that the postmerger chaos has settled, in part because Hurd has clarified roles and given managers more autonomy over their business. After Hurd arrived, he discovered that "we had a front-end sales group that shared decisions with the product generation organisations. In a few cases, there were nine layers of management between the CEO and a customer. And some business divisions had less than 30 percent of their budgets directly under their control because of the way costs were allocated", he noted in his letter to shareholders accompanying HP's 2005 annual report.
"[Fiorina] sought to be the centre of HP, to centralise decision making. But she started having to do layoffs, and the amount of money that each business unit manager could control was so centralised, no one felt they had knobs or dials or any axes of control," Eunice said.
New executives have brought fresh blood into HP's ranks, and new board members have done the same thing for the executive committee. The company appears to be more unified than it was under Fiorina, when former Compaq and HP staffers were still finding their way in the newly melded organisation.
Fiorina was an easy target for many frustrated HP employees, partners and customers, said Roger Kay, an analyst with Endpoint Technologies Associates. Her flashy style and marketing jargon turned off many of the old guard "HP way" engineers, who were more accustomed to low-key executives.
"Her ability to execute was limited, but she had good ideas and good visions," Kay said. Had Fiorina been willing to accept a strong operationally inclined second-in-command perhaps someone like Hurd the company might not have floundered the way it did in 2003 and 2004, with multiple reorganisations and earnings misses.
However, thanks in no small part to Hurd, it appears that Fiorina's controversial merger plan is slowly getting its due.
"People vilified her for the purchase of Compaq, but it's turned out to be a good thing. She liquefied the company and got it out of its stodginess, and Mark was able to form that liquid," Kay said.
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