The Cuts Aren't Over at HP

CEO Mark Hurd says the company's operational and information technology costs are still too high

Mark Hurd is not done cutting at Hewlett-Packard. Not by a long shot.
The HP chief executive officer has already seen the company through a huge restructuring that reduced headcount by more than 15,000 and overhauled its retirement plan. And at a meeting with analysts in New York on Dec. 12, Hurd made it clear that there is still more work to be done.

"We are a company transforming, not a company transformed," Hurd said more than once during his remarks. And it's clear there are many targets he has in mind. Real estate is one—HP has "too much" of it, according to Hurd. Operational and information technology costs are too high, he said. "We still have a lot of heavy lifting to do."

Take IT costs. Analyst Lou Miscioscia of Cowen & Co. in New York estimates that HP spends 4% of sales on IT infrastructure. "That's high compared to other companies who spend about 2% to 3%. If they cut it down to those levels, that could mean $900 million in savings," he says.
But as any first-year MBA student knows, cutting costs doesn't translate into increasing revenue. Hurd says that calls for flooding the zone with a batch of new sales personnel. Hurd wouldn't say exactly how many the company has hired or will recruit, saying only that so far "hundreds" have been brought in, and that their results are being tracked closely. "We track sales by person, not only to see how much they're selling but what else they have in their funnel," Hurd said.

So between cutting costs and boosting sales personnel, is that enough for HP ? Not to American Technology Research analyst Shaw Wu, who says he's keeping his neutral rating on the stock for now. "Everything they said is pretty much in line with expectations," Wu says. "We expected more cost-cutting and more attention to sales. But at some point HP needs to reinvest and build up some new revenue streams. Until then it's going to be mostly a cost-cutting story."

Clearly, there is progress being made. The operating margin range expected for 2008 is way ahead of the 6% range HP turned in for 2005. And that leaves the picture looking anything but dour at HP for the next eight quarters or so. "Hurd is a master of setting attractive expectations and then overdelivering on them," says Cowen's Miscioscia. "Even just hitting those expectations, the picture is pretty attractive."

HP to pay to settle pretexting lawsuit but shareholder suit alleges insider trading

HP agreed yesterday to pay $14.5 million to settle a lawsuit brought by state Attorney General Bill Lockyer accusing the company of unfair business practices in its crusade to unmask the source of boardroom leaks to the news media.

The vast majority of the settlement -- $13.5 million -- will fund state and local investigations into privacy rights and intellectual property violations, according to the lawsuit and settlement filed simultaneously in Santa Clara County Superior Court.

"Fortunately, Hewlett-Packard is not Enron," Lockyer said. "I commend the firm for cooperating instead of stonewalling, for taking instead of shirking responsibility, and for working with my office to expeditiously craft a creative resolution."
The state likely would have recovered far less if the case were taken to court, based on the limited penalties it could claim for each phone number that was illegally accessed during the leak probe, Lockyer said in an interview with The Associated Press.

"It's a good example of the HP that we all grew up with, the old HP of Hewlett and Packard, the ethics and principles of corporate responsibility and good management practices," he said. "We see those re-emerging in the way they dealt with this matter."

The remainder of the settlement amount consists of $650,000 in civil penalties and $350,000 to cover the state's investigation and other costs. HP has also agreed to various governance reforms to be in place for five years, which Lockyer said will help protect privacy rights during any future HP investigations. Some of those reforms include the appointment of an independent director to monitor HP's compliance with privacy guidelines, and additional training for investigative staff.

HP CEO Mark Hurd said in a statement that the company is "committed to ensuring that HP regains its standing as a global leader in corporate ethics and responsibility." The agreement did not include a finding of liability against HP. Prosecutors said the company hired outside detectives who tricked phone companies into disclosing the private phone records of directors, journalists and others so the company could track the source of news leaks.

Revelations of the probe, disclosed in a regulatory filing, led to an exodus from the board, criminal charges, a congressional investigation, and ongoing federal probes by the FBI, the Securities and Exchange Commission, federal prosecutors and other agencies. Dunn, who was ousted over the incident, former ethics chief Kevin Hunsaker and three outside investigators, Ronald DeLia, Matthew DePante and Bryan Wagner, have pleaded not guilty in Santa Clara County Superior Court to charges of identity theft and fraud for their roles.
The company's stock price has been relatively unaffected by the scandal, buoyed by strong earnings growth under CEO Mark Hurd and the belief that the turmoil had little affect on operations.

HP shares have actually gained around 9 percent since the probe was disclosed in a regulatory filing, but fell 28 cents to $39.86 Thursday on the New York Stock Exchange. News of the settlement was reported late Wednesday by CNet Networks Inc.'s News.com.
Details of the agreement were announced after the market closed, and HP shares gained a penny.

Analysts said the penalty was relatively minor and would go a long way toward assuaging fears among skittish investors. "It looks like they got off pretty easy, and that this is actually going to be a good thing for HP," said Roger Kay, who follows the company as president of market research firm Endpoint Technologies Associates. "It looks like they're in control of their destiny and have put at least some of this behind them."

But another lawsuit alleges that Chief Executive Mark Hurd and other directors and senior executives sold about $41.3 million of HP stock in the two-and-a-half weeks preceding HP's disclosure that investigators working on its behalf used false pretenses to obtain directors' and journalists' private phone records.

This lawsuit alleges the board approved stock buybacks totaling $10 billion in the months leading up to the scandal "to keep the company's stock price propped up while insiders were selling." The board knew its leak investigation was likely to be made public when it approved a $6-billion repurchase on Aug. 21, the suit alleges.

"Pattie Dunn is not accused of insider trading," Brosnahan said in a statement. Dunn "has never sold any of her Hewlett-Packard stock". The lawsuit alleges that sales by HP insiders surged in the third quarter, when the leak investigation was disclosed, from previous quarters. Hurd, who replaced Dunn as chairman, sold 125,000 HP shares for about $4.38 million from April 3 through Aug. 25, according to the lawsuit filed on behalf of investors, including a union pension fund.

The investors, represented by law firm Lerach Coughlin Stoia Geller Rudman & Robbins LLP, claim the defendants sold shares because they knew "the market's perception of HP would be significantly damaged when (not if) the market became aware of the full extent of distrust and acrimony among board members, the outlandish smear campaign tactics the acrimony had spurned and the illegality of the investigatory tactics being used."

CPB is over. Here is the IPB.

Mark Hurd is now considering more than two CPBs moving forward. Not only Business Unit CPBs and sub-Business Unit CPBs but workgroup CPBs !

So the name COMPANY Perfomance Bonus doesn't make sense anymore. We kindly suggest the use of IPB (Individual Performance Bonus) as a better acronym. Just one more individual reward at HP, we were short of...

HP one company ? Forget about it !
Teamwork at HP ? ...

"Tough Cultural Message" Mark Hurd said : you bet !

2 CPB, 2 Issues...

It was great to get a FY06 bonus while HP is multiplying profit by 4, but...

1/ HPS employees are furious to get 4.83% when all the others enjoy 9.47%

2/ Non HPS employees should have been happy to get more than one month of salary, but they don't fully enjoy it because of point 1...

Nobody noticed that HPS and non HPS employees are all working together...

"Importance of building trust" matters to Wall Street and customers. To employees also !

The SEC development is a dark cloud over HP's sunny financial news

The SEC development was a dark cloud over HP's sunny financial news.

HP said in a regulatory filing that the SEC had upgraded its informal inquiry into the spying scandal into a formal investigation.

The Federal Communications Commission has also requested documents related to HP's effort to unmask the source of boardroom leaks to the media, and HP faces five shareholder lawsuits related to the investigation, according to the filing.

HP had previously disclosed that it was the subject of inquiries by the SEC, the U.S. Attorney's Office for the Northern District of California, a congressional panel and California's attorney.

Five years on: HP Compaq merger declared a success

IDC believes the deal has achieved its main objectives :

"This deal enabled the merged company to grow revenue and profits in an increasingly competitive marketplace." "The merger accomplished what HP and Compaq set out to do in the first place, providing the critical mass and reach needed to ensure a long-term role in an industry undergoing a fundamental transition," said Jean S. Bozman, research vice president in IDC's Worldwide Server group and co-author of the report.

But IDC warned that organisational changes have remained a "critical issue" as HP had reduced the size of its workforce, seen the departure of two chief executives, and reorganised its management structure. However, it was not just technological change that facilitated the merger. IDC maintained that the commitment to cultural change was equally important, where it was hoped that the infusion of Compaq's fast-paced corporate culture would help increase HP's "business velocity".

OpenView gave HP a foundation from which to build in the software business, putting the company in a stronger position to compete with the largest system and services providers worldwide, the analyst firm noted. According to IDC, an important linchpin to the merger's success was the commitment to infrastructure software, which helped move the combined company away from commodity hardware and into the management layer.

"By completing the deal when it did, HP managed to position itself for the next wave of enterprise computing by leaping ahead of the trends that were working against the two companies as independent entities." "The merger came at a time when both companies were becoming irrelevant in a number of key product categories. "What makes the merger interesting from a technology perspective is the extent to which HP has improved its position in a number of core markets that were rapidly commoditising," said Crawford Del Prete, senior vice president of communications, hardware, services and software research at IDC.

IDC has now claimed that the firms have successfully completed a "massive integration effort" and moved the combined company forward to new revenue and profit levels. The analyst firm said at the time of the merger, which was first mooted in September 2001, that the two companies would be "better off together".

Five years after the mega-merger that saw Compaq climb into bed with HP, IDC has declared the deal a success.

Executive Carnage at HP ?

Five general managers lost in the last two weeks !

- Steve Smith, the head of HP's revenue-flat $15.5 billion services business, has unexpectedly resigned, citing personal reasons.

- The head of HP's billion-dollar OpenView business, Todd DeLaughter, has quit to become CEO of Opalis, the Canadian software company.

- HP's channel chief John Thompson has left and Rick Becker, the head of its blade operation, which has been waging hand-to-hand combat with IBM, has been poached by Dell, presumably at the behest of his old boss Brad Anderson, who went to Dell last year as senior VP of its product group. Becker was also CTO of HP's x86 servers. Anderson used to run HP's industry standard servers Smith, DeLaughter and Becker all worked for Ann Livermore, the head of HP's $33 billion technology solutions group, who will temporarily replace Smith until the company comes up with a new body.

- HP had also lost the GM of its Business Critical Systems unit Rich Marcello. He has quit to work for non profit organisations.

HP UK & I Dress code...

Message just sent to Managers of UK & Ireland Employees... :

As part of our site consolidation programme we have reviewed our office related policies such as dress code. As a manager within HP you are responsible for ensuring your team complies with the dress code outlined below and intervening where individuals are not complying to the appropriate standards. The dress code will be communicated to all employees following this communication.

In summary, the UK&I region has a dress appropriately code, meaning we trust our employees to dress appropriately for the business situation they are managing.
HP has a high quality brand image and we want to reflect this in all aspects of our work, including dress. We will no longer have "dress down Friday" as this is unnecessary with our updated dress appropriately code.

We simply ask you to ensure trousers/jeans, shirts/t-shirts and footwear are smart and presentable. If a reminder is needed about what is considered inappropriate this includes :
- Halter, vest, spaghetti strap or strapless tops
- Shorts, ripped jeans or leggings
- Excessively short skirts
- Athletic or sports clothing
- Plastic flip flops or other beach footwear
- T-shirts with offensive logos
- Clothing that is ripped, torn or revealing

For those employees based on customer facing sites such as Wood Street and Bracknell please remember that our appearance contributes to the customers and visitors impression of HP. It is particularly key on customer facing sites that every employee fully adheres to the dress code regardless of role to create a professional image to our customers.

By dressing appropriately we can maintain a flexible, creative environment at HP and present a professional image to our customers.

Thanks for your support

HP wins EU approval to buy Mercury

BRUSSELS, Oct 20 (Reuters) - Hewlett-Packard Co. won permission from the European Commission on Friday to buy Mercury Interactive Corp. for about $4.5 billion in stock, or $52 per share.

"The Commission concluded that the proposed transaction would not significantly impede effective competition in the European Economic Area," the European Union's executive arm said in a statement. The deal is aimed at expanding the computer maker's business software operations. The purchase of the former star Israeli technology company also puts HP in closer competition with other systems management software providers, including IBM's Tivoli unit, CA Inc.'s UniCenter and BMC Software.

It is the biggest acquisition by HP since its controversial $19 billion purchase of Compaq in May 2002. Since last year, a number of top Mercury executives have left the company amid a regulatory probe into its stock option granting practices. The financial scandal drove Mercury, once a top performing stock, to delist from the Nasdaq market.

HP is paying a premium of about a third for Mercury shares in the $4.5 billion deal, which is net of Mercury's existing cash and debt, and ranks as one of the largest prices ever paid to acquire a company with Israeli roots. The deal will nearly double HP's software business to more than $2 billion in annual revenue and deliver growth rates of 10 percent to 15 percent by 2008, the company said when the deal was announced.

Tough choices...

Fiorina book says HP board made her job difficult...

Carly for Governator ?

What Carly Doesn't Say

And much more in comments !

Bring back the HP Way, Mr. Hurd !

An open letter to Mark Hurd, click here !

HP to double work force in Costa Rica

Hewlett-Packard Co. said Friday it opened its second call center and outsourcing facility in San Jose, Costa Rica, and thatit plans to nearly double its work force in the country to more than 6,000 employees by 2008.

H-P said the new facility will handle call-center operation and business process, payroll, financial and accounting services.

The company said its current Costa Rican operations handle more than 70,000 calls a day. The Center there is one of eight used by HP around the world.

Published August 18, 2006 by the Silicon Valley/San Jose Business Journal

HP's Israeli Investment

Forbes :

Hewlett-Packard's decision to purchase Mercury Interactive, the Israeli-American business-software developer, for $4.5 billion will turn Mercury's R&D center in Israel into HP's largest software development center worldwide. It's the company's largest acquisition since it bought Compaq Computer for $18.9 billion in 2002.

But it seems that the 700 new HP employees in Israel may have a reason for concern, at least if they were to consult their colleagues in HP Israel, the local division of global HP. Forbes Israel reports that in March, HP fired 15 senior executives in its Israeli division, including Chief Executive Gil Rosenfeld after it suspected they ran a gray market--exporting servers that should have been sold only in Israel to other countries for a higher profit. After investigations, hearings and legal fights, HP backed off and cleared Rosenfeld's name. However, Rosenfeld decided not to return to the company, leaving the division in turmoil.

Now, HP Israel's employees are in a panic. They refuse to talk, afraid of eavesdropping and denunciation, while checking other employment opportunities. In April, HP's server sales in Israel dropped 40%, and clients claim that sales might continue to drop in the next quarters. Still, HP says that the quarterly results of the Israeli division match its expectations.
According to information that was leaked to reporters, HP Israel was accused of illegitimately exporting 30,000 servers--half of the total amount imported to Israel each year--for $50 million. By running this kind of gray market, HP Israel could benefit, for example, from the higher price of the servers among foreign trading partners, and from the differences in exchange rates. However, while HP Israel gains, the local HP distributor in the destination country loses, and so does the parent company, whose global sales plans are foiled.

Rosenfeld was fired during lunch. His pink slip was sent to his iPAQ while he was dining with a CEO of a major Israeli company. "Dear Gil," the message on his iPAQ read. "As you know, during the last weeks we conducted an investigation…and found evidence that tie you to severe violation of company procedures....Due to the findings, HP considers to terminate your employment with the company." Rosenfeld denies any gray market activity in the Israeli division. "HP was misled--it was victimized," he says. "I'm not looking for revenge, and I don't want to talk against HP. It was my home for 18 years. I loved it, and I still love it."

The exact details of the investigation were never publicly disclosed, but toward the end of 2005, and perhaps earlier, HP received complaints about gray-market activity in its Israeli division. The complaints may have been lodged by executives of other HP divisions in Europe, and possibly, as Rosenfeld implies, they were lodged by local workers who were seeking ways to hurt him after he laid them off. "People were looking for revenge," he says.

In mid-February, a team of American and British investigators landed in Israel. For five weeks, they interrogated employees and searched for evidence in files and computers. Some employees claim that the investigators even monitored their calls. The probe eventually found its way into the Israeli media. Newspapers were given details on what the team of investigators was seeking. "The team will investigate senior officials in the local division due to suspicions about severe violations of the company's procedures," wrote Maariv, Israel's second-largest newspaper. "If the suspicions will be realized, some senior officials in HP Israel might lose their jobs."
And they did. But Rosenfeld decided not to give up without a fight. "Getting the pink slip was the shock of my life," he says. "I decided to fight the company I love to clear my name. I was angry, and my family helped me a lot. My legal counsel was Tamar Golan, who is my mother-in-law, and together with my wife and father, we created a think tank. We worked day and night. It was an amazing team effort."

HP refused to present Rosenfeld with the investigation's findings, and the case arrived in Israel's labor court. The court ruled that HP should present the report to Rosenfeld and the other executives whose jobs were terminated. Those who've read the report under a pledge not to disclose its contents are able to testify about what it doesn't contain--any real evidence against the executives.

After a mediation process, Rosenfeld was cleared of any suspicion, though the situation of the other executives dismissed at the same time remains unclear. HP released a statement asserting that it had never cast any doubt on Rosenfeld's integrity, nor his achievements, and regretted the misleading media coverage that was made without its knowledge or consent.
The crisis between Rosenfeld and HP lasted exactly one month, from March 23 to April 23. Then, Rosenfeld decided to leave the company. "It was the right thing to do," he says.
Rosenfeld says HP should now take care of its employees. "The workers in Israel are an amazing group of people of superb quality. The only thing that the company needs to do now is to pet the workers, the clients and the market. The company needs a leader who is a 'man of heart,' because the damage is emotional, not rational."

HP's comment: "The company never discloses information about investigations related to its business regulations."

Mercury Interactive, its profits in retrograde, will be bought by H-P

San Francisco Business Times :
HP said today it will spend about $4.5 billion to buy Mercury Interactive Corp., a business software maker that recently changed its reported 2003 profit to a loss.
H-P will pay $52 a share in cash for Mountain View-based Mercury

Palo Alto-based H-P, which has 150,000 employees, said the deal will increase annual sales at its software unit to $2 billion. After a tender offer for all outstanding Mercury shares, Mercury will merge with an H-P unit. The deal should close in the fourth quarter of 2006.

H-P did not address Mercury's status with the Securities and Exchange Commission. The SEC said earlier this month it might file civil charges against company directors.

In early July, Mercury restated financials for fiscal years 2002, 2003 and 2004, reporting about $566.7 million less in income than previously posted. The restatement reversed Mercury's reported 2003 profit of $41.5 million into a loss of $62.6 million. For 2002, the company cut its profit of $65 million to $37 million; for 2004 from $84.6 million to $53.7 million.
Mercury said its legal and accounting bill for the cleanup is likely to be around $70 million.

Mercury at a Glance :
CEO and President = Tony Zingale
Year Founded = 1989
Revenue 2004 = $685.5 Million
Number of Employees = 2,659
Worldwide Offices = 26
http://www.mercury.com/us/company/corporate-info/contact-us/ww-contacts/

HP to combine functions in ongoing restructuring

June 20 (Reuters) - Hewlett-Packard Co. said on Tuesday it will further streamline its business by combining some operations. Supply Chain, Procurement, Logistics, Order-Fulfillment, Related Functions to be Fully Integrated Into Businesses !

France : final agreement reached in the multi-union negotiations

HP in France will be quite peaceful in the next 18 months as a final agreement has been reached in front of the 3 working councils with most of the 5 unions, puting an end to the largest social conflict ever for this company.

Worforce Reduction will start third week of July, and about 900 employees (17% of staff) are expected to leave on a voluntary basis until end of 2007. It could be more with new talks coming July 10th after knowing how many employees want to leave exactly.

HP CEO Hurd cashes in options

Mercury News

Mark Hurd took advantage of his one-year anniversary as chief executive of Hewlett-Packard earlier this month to cash in on the run-up in HP's share price when the first third of a 400,000-share restricted stock grant, given when he was hired, officially became his. The 400,000 shares were worth $8.68 million on the day they were granted at the beginning of April 2005, when HP shares closed at $21.71. A year later their value had grown by more than half to nearly $13.2 million. A third of them became Hurd's on April 1, and he promptly sold 58,081, or nearly 44 percent of the shares back to Hewlett-Packard for $1.9 million to cover taxes. Two days later he sold 25,000, or a third of the remaining shares, on the open market for $33.57 each, or $839,168.Hurd set up an automatic trading plan March 7 under the Securities and Exchange Commission's 10b5-1 rule, which allows executives to sell a set number of shares over a predetermined amount of time. (Executives have increasingly adopted such plans to avoid questions about the timing of their stock trades.)

Hurd, who got a $2 million signing bonus when he was hired and $2.75 million to help him relocate from Ohio, was also granted an option to buy shares at $21.73, including 700,000 shares that vest annually over four years, and 450,000 shares that vest in thirds over three years. (The grant for 450,000 shares was given to make up for compensation he forfeited from his previous employer, NCR.) When the 1.15 million options were granted in 2005, HP estimated their value at $6.2 million. The 28 percent of the options that are now Hurd's to exercise were worth $3.5 million at last week's closing price of $32.62. That's more than half of the estimated value of all the options when they were granted.

Also cashing in recently was HP's chief financial officer, Robert Wayman, who made nearly $2 million the first week of March when he exercised his right to buy 175,000 shares at $21.75 each and then sold them at prices ranging from $32.84 to $33.10.Wayman, who has been the company's chief financial officer since 1984, served as its interim chief executive following Carly Fiorina's firing in February 2005 until Hurd's arrival in April of that year, and received an extra $3 million cash payment for his efforts.

H-P hires Disney HR boss

Hewlett-Packard Co. said Friday it hired John Renfro, head of human resources at the Walt Disney Co., to run the HR department at its imaging and printing division.

Renfro will serve as vice president and report to Marcela Perez de Alonso, executive vice president of human resources for HP, and to Vyomesh Joshi, executive vice president of IPG.

Renfro will be responsible for improving organizational effectiveness, developing high-performance teams and delivering world-class HR programs for IPG, which reported revenue of $25 billion in FY2005.

Renfro, 46, joins HP after four years at Disney, where he served as senior vice president and chief human resources officer reporting to Robert Iger, president and chief executive officer. Previously, Renfro ran the human resources function at Gateway and Zenith and held senior HR positions at Ameritech and A.C. Nielsen, a division of Dun & Bradstreet.

Renfro will be based in San Diego and will join HP effective May 17.

HP plans more acquisitions

SAN JOSE, Calif. (MarketWatch)
HP will use six main strategies to grow, including pursuing organic opportunities and acquisitions, Hurd said in a speech delivered at the Bay Area Council's annual Outlook Conference in San Jose.

H-P has about $14 billion in cash and no debt, Hurd said, giving the computer and printing company the ability to leverage its finances to make acquisitions. "You won't see any transformational acquisitions," Hurd said. "But you will see us be more acquisitive."
H-P's $19 billion takeover of PC rival Compaq in 2002 helped contribute to the departure of Hurd's predecessor, Carly Fiorina.

Hurd said H-P isn't looking to sell its PC business, which generates roughly $30 billion a year in revenue. The PC business helps H-P control costs when it buys products for other parts of the company, such as its industry-standard server division, according to Hurd.
"We're not working on getting rid of the PC business," he said. "We're working on making it better."

HP's Hurd: year 1, kick butt; year 2...

HP investors are happy about CEO Mark Hurd's first anniversary, but wondering if he can keep the gains coming.

CNNMoney.com : Shareholders of HP are celebrating a happy anniversary -- the company's stock has risen 50 percent since Mark Hurd stepped in as CEO on April 1, 2005. But his hardest job -- boosting revenue at the tech behemoth -- is still to come.
Since taking over from ousted CEO Carly Fiorina, Hurd has trimmed fat and boosted profitability at the No. 2 computer maker, which had fallen on hard times after the Internet bust and its disastrous Compaq merger. Hurd took over as CEO of HP one year ago this April.

Shareholders say that in sharp contrast to the flashy Fiorina, Hurd is a no-nonsense manager who has brought focus and discipline to HP. Investors say he's a talented cost-cutter who has excelled in accomplishing his first task of increasing profitability.

"Carly was trying to drive revenue growth, and she was bleeding the printer business by using the higher profits in that business to fund unprofitable growth everywhere else," said Tony Ursillo, stock analyst for the Loomis Sayles Research Fund. "(Hurd) has dialed back the sales growth objectives and focused those units on operating more efficiently." But whether he can drive revenue growth -- next on his to-do list -- remains to be seen.

"Is he a visionary? I think the jury's still out on that," said Ursillo, whose firm bought shares of HP when Hurd's appointment was announced and increased its position substantially not long after that. But he added that Hurd has done a good job of recruiting and surrounding himself with talented executives, including those from Dell, Palm and a veteran of Siebel and IBM.

After the "rock star" CEO Fiorina was ousted by the board, Hurd, former CEO of NCR, which makes bank cash machines and check out terminals, wasted no time in slashing costs. He cut the company's work force by some 15,000, discontinued its pension plan in favor of a 401(k) and boosted profitability in flagging businesses like servers and software. The company beat earnings and revenue estimates for three straight quarters and also shifted its profit mix. It had been that 75 percent of the company's profits came from the printing business -- mostly "consumables," such as laser and toner cartridges for printers. Now printing is about half of profits, said Ursillo, not because that business is declining, but because the servers and software businesses are on the rise.

Mike Demos, equity analyst at Fifth Third Asset Management, said those areas had nowhere to go but up, and he thinks investors should be concerned about profit margins in the imaging and printing group. Demos works in the firm's core holdings group, which does not own shares of HP, but he said the firm owns shares elsewhere. "The printing business is still by far the most important franchise there," said Demos, noting that while it had a good quarter last quarter, margins have been falling, an area of concern mentioned by other analysts who follow the company. He adds that the business faces competitive pressure from retailers who offer in-store refills of toner cartridges.

Investors may wonder if the party's over, now that the obvious cost-cutting steps have been taken and shares have already enjoyed a big run. Ursillo thinks the restructuring will continue to reap benefits, though sales growth is unlikely to ignite anytime soon. Analysts on average expect 5 percent revenue growth in fiscal 2007, beginning in October of this year. Ursillo, more optimistic, thinks as much as 8 percent is possible. But that won't be easy. The company's biggest business is under pressure not only from domestic competitors like Dell and Lexmark but also foreign competitors and third-party ink suppliers.

"That's a huge challenge," said Kim Caughey, vice president and senior analyst at Fort Pitt Capital Group. Caughey's portfolios do not hold shares of HP, though she monitors the stock closely. "The margins are falling in printer and printing supply business." Ursillo said he finds HP's forays into consumer products, such as installing photo printing kiosks in drugstores and selling TVs at Best Buy, as the Wall Street Journal reported Friday, to be encouraging. "That is the perfect example of how HP can take advantage of both its market position and brand to address some large markets it doesn't play in too well," he said. But Caughey pointed out that making money in consumer products is tough, given how fickle consumers can be about products and brands.

Demos said growing revenues will be a much more difficult challenge for Hurd than what he faced his first year on the job, adding that the same "law of large numbers" that IBM faces is a problem for HP as well -- that is, when you already have upwards of $90 billion in annual revenue, growth in the double-digits is tough to come by. But Ursillo thinks the stock can cruise up to $40 -- from a recent $33 -- on restructuring alone. He points out that the stock is trading at about 17 times expected fiscal 2006 earnings.

"The stock's ability to keep outperforming hinges on continuing to gain market share where it's already present and on bringing to market some new and innovative products, particularly on the consumer side," he said. "If we see evidence of that growing, I think the stock continues to outperform through next year."

New Managing Director in France

Patrick Starck, Managing Director of HP France and Vice President and General Manager Technology Solutions Group, has made the decision to leave HP and pursue another career opportunity.

Johan Deschuyffeleer will serve as the Managing Director of HP France and Vice President and General Manager of the Technology Solutions Group, on an interim basis, effective immediately. Since 2004, Johan has been Vice President of Go-To-Market Strategy and Sales Productivity, leading the company-wide effort to improve value sales effectiveness and enable value and volume sales success in every market, region and country where HP does business. Prior to that, Johan served as Vice President and Country General Manager for HP Belgium, where he played a leading role in building and maintaining customer loyalty and trust throughout the HP/Compaq merger. While serving earlier as Managing Director for the Belgium-Luxembourg region, Johan succeeded in transforming the company into one of the main suppliers of IT infrastructure solutions in these two countries.

Johan holds a degree in Industrial Engineering from IHRB University in Brussels. He also earned a Master's Degree in Management from IMD International in Lausanne followed by further qualification from the Vlerick School.

What about Carly ?

One year after HP ouster, Carly Fiorina has a new life CIRCLING THE GLOBE FOR $50,000-PLUS SPEECHES

San Jose Mercury News / Feb. 9, 2006
By Nicole C. Wong

Toppled from her perch as one of Silicon Valley's most powerful women one year ago, Carly Fiorina has put together a new life that retains some of the trappings, if not the influence, of an elite corporate insider. Since Hewlett-Packard's board showed her the door, the ousted chief executive has been crisscrossing the globe -- and commanding big bucks -- speaking about how to be a good leader. In lots of little ways, Fiorina's past year has been about trading places. Her glory may be fading on the West Coast, but rising on the East Coast. HP removed her portrait from the lobby of its Palo Alto headquarters. But the University of Maryland -- where Fiorina earned her MBA -- hung one up in its Alumni Hall of Fame.While she and her husband still own a Tudor-style mansion on a 2.63-acre lot in Los Altos Hills, they bought a Georgetown condo in Washington, DC, for $3.6 million in May. And instead of leading Silicon Valley's legendary hardware company from the chief executive's seat, Fiorina is serving on the board of directors of two Washington-area companies: Cybertrust, a privately held information security firm, and Steve Case's Revolution Health, a venture that funds companies offering more choice in customer health care services.Slowly, she's been admitting some mistakes she made while at the helm of HP. But not many. And she remains resolute in her public speeches that the biggest and most bitterly fought decision of her HP tenure -- to merge the company with Compaq Computer -- has proved a success.

``I would do the merger all over again,'' Fiorina told more than 600 people who packed a Los Angeles ballroom to hear her October keynote address at the Internet Telephony Conference and Expo. ``I think the merger has been a resounding success.''As Fiorina, 51, has traveled the international corporate speaker circuit since she left HP, she's kept a low profile and shunned media attention. Her spokeswoman kept a reporter away this week, saying Fiorina is busy writing a candid book about her career, due out in September, and is about to travel abroad for two weeks.Speculation was once rife that she would take a high-profile government or public-service post. For a while she was rumored to be a candidate to head the World Bank, but that job went to someone else. Since then she's settled into the life of a former corporate executive in demand for convention keynotes.Her comments surface sporadically from reports around the world of her occasionally frank speeches.After giving an October keynote in Singapore on the essentials of leadership, Fiorina told the audience at the Asia Business Leaders Forum that while at HP she underestimated some people and overestimated others, according to two newspapers in Singapore. She also said she had not prepared people for the magnitude of the problems associated with the Compaq merger, which was completed in 2002.One industry analyst, Rob Enderle, said Fiorina's key flaw was misjudging people. She erroneously believed in the abilities of some people she picked as lieutenants but blew off powerful people like William Hewlett, the son of an HP co-founder who waged a publicly messy proxy battle against the merger.She also failed to build a solid group of supporters at HP. ``She thought she could dictate loyalty,'' Enderle said. ``She didn't have to build it.''But Fiorina isn't staying home to pout in her gated Los Altos Hills home. She'll be jetting off -- as was her style while still CEO -- to Australia and New Zealand to speak, again, about leadership at the Global Business Forum conferences starting Feb. 22.She'll be hobnobbing with other wealthy and well-known -- albeit unemployed -- ex-chief executives speaking at the event: Disney's ex-CEO Michael Eisner, Asimco Technologies' ex-CEO Jack Perkowski, and former U.S. President Bill Clinton.

Conference organizers will pay more than $50,000 for her hour-long leadership talk and question-and-answer session. That puts her in roughly the same league as Donald Trump, NFL Hall of Fame Lineman Howie Long, and Duchess of York Sarah Ferguson -- who are among the two dozen speech-makers available through the Washington Speakers Bureau for at least $40,001 a pop.Enderle, the industry analyst, thinks Fiorina's new focus as corporate board member makes better use of her talents.``She has amazing vision,'' Enderle said. As HP's CEO, ``her problem was she was not operationally oriented.'' But he added, ``On a board, she could be a relatively good asset.''Fiorina is also an impressive speaker, one of the few who rivals Apple Computer's Steve Jobs, Enderle said. And people will come to see the first woman to run one of the largest 20 U.S. companies, even if she did disappear from Fortune's list of 50 most powerful women in 2005.

Rich Tehrani, who snagged Fiorina to speak at the Internet conference last fall, said she seemed unpretentious and approachable when he called to arrange the appearance.``She wanted to make sure we didn't call her the most powerful woman in the world,'' Tehrani said. ``She seemed beyond humble. She's put on this pedestal by so many people, and yet is more humble than the person sitting next to you.''``Maybe that has to do with not working,'' he mused. ``Retirement may relax you to such a degree that you're not stressed out anymore.''

HP reports first quarter 2006 results

"Growth was balanced across most of our businesses and geographies, cash flow was strong and we were disciplined in controlling costs. While hard work remains ahead of us, our efforts are starting to show results." (Mark Hurd)

Click on the title to learn more

"HP Smells The Team Spirit ! " (Forbes)

Mark Hurd has made eight executive hires since last June, and so far, the new faces have done wonders for the company's spirit, according to Bear Stearns analyst Andrew Neff.

"It appears that CEO Hurd is assembling an impressive team of executives from the outside in key management roles," wrote the analyst in a recent report. Examples of recent hires include former CEOs of Palm and Vignette

This is in contrast to prior leadership at HP, which were mostly internally supplied. "It corroborates our view of a renewed sense of vigor and competitive spirit at HP," Neff said. The analyst believes HP represents a turnaround story, not a growth story.

"It will need to develop growth engines as the cost story matures," Neff said. "However, investors often miss viable turnarounds as they seem too expensive for value players."

European WFR status

In the first comment !

Fortune magazine 100 Best Companies : HP did not make the list.

The list has been published by Fortune since 1998. HP was included on the list the first four years. In 2002 and 2003, HP was not eligible to for consideration due to the merger. In 2004 and 2005, HP applied but did not make the list. The liste for 2005 was released January 9th

More information on the list may be found at: http://money.cnn.com/magazines/fortune/bestcompanies/
Genentech captured the top spot on this year's list. The majority of the companies on the list are small (1,000-2,500 employees) to midsized companies (2,500-10,000 employees), based on the number of U.S. employees. HP competitors such as IBM, Lexmark and Dell do not appear on the list. Also absent are other large global companies that HP benchmarks against such as GE and GM. High-tech companies on the list include Cisco, Microsoft, Intel, Yahoo, Intuit and Network Appliance

IBM to Freeze $48B Pension Plan in 2008

BOSTON (AP) -- Furthering corporate America's move away from pensions, International Business Machines Corp. said Thursday it will freeze its $48 billion pension plan in 2008 and instead enhance its 401(k) benefits for its 125,000 U.S. workers.

Nearly all IBM's U.S. employees -- everyone hired before Jan. 1, 2005 -- have pension benefits accruing under a traditional annuity-like plan or a cash-balance plan, which gives workers interest-bearing funds that they can take with them if they leave the company.

But these "defined-benefit" plans are becoming rarer. Companies say the plans carry too many uncertainties, largely because swings in interest rates and investment performances change accounting considerations and the amounts businesses must contribute to their pension funds in a given year.

Industrial giants such as IBM and airlines that still carry pension obligations say the costs and complexities hamper their ability to compete with younger, more nimble rivals that aren't saddled with pension obligations.

Beginning in 2008, then, IBM workers' pension benefits will be locked in place, based on salary and length of service. The accrual of benefits will stop, meaning future raises or additional years with the company will not signify bigger pension checks upon retirement.

Instead, IBM will increase its contribution to its 401(k) plans, in which workers get a defined, predictable amount from the company that they're responsible for investing. IBM will double the percentage of employees' contributions that it matches, to 6 percent of salary; certain employees will be eligible to receive more. Current retirees will see no changes.

IBM executives said that by no longer having to account for pension accruals that would have mounted after 2008, the Armonk, N.Y.-based technology giant will save between $450 million and $500 million this year alone and up to $3 billion from 2006 through 2010.

However, the change will result in a $270 million charge in the just-completed fourth quarter of 2005.

The action mirrors steps IBM has already taken in other countries, and follows IBM's decision to offer 401(k) plans only -- no pensions -- to workers hired after Jan. 1, 2005. Similarly, rival Hewlett-Packard Co. decided last year to offer only a 401(k) plan to U.S. workers hired this year and beyond.

Patrick Kendall, a pension expert at Diversified Investment Advisors, a consulting firm specializing in retirement plans, said the "hard freeze" IBM announced Thursday was almost inevitable considering the company's earlier "soft freeze" of closing the plan to new employees.

"I think a lot of these sponsors would like to get out of (defined-benefit plans) entirely, just terminate the plan," he said. But many companies find that termination fees and other complications negate that strategy, he said.

Pensions have been a touchy subject for IBM, which was hit with a federal lawsuit -- settled for up to $1.4 billion -- filed by employees who contended that IBM committed age discrimination when it shifted to a cash-balance plan.

Randy MacDonald, IBM's head of human resources, said the decision was unrelated to the lawsuit.

"It's all about cost-competitiveness, so that we could continue to be the financially viable company that we are," he said.