HP to cut more costs, Hurd says

Hewlett-Packard Co. (HP) continues to diversify and streamline its business according to goals Chief Executive Officer Mark Hurd set when he joined the company nearly two years ago. But the IT giant still needs to cut costs to achieve operational efficiency, the company’s top executive told members of the financial community on Tuesday.

“We are a company that is transforming; we are not a company that has transformed,” Hurd said, speaking at a meeting of securities analysts in New York.

Hurd acknowledged that HP’s cost of operations are still too high for the company to run at its most effective, though the company has completed a 10 per cent workforce reduction it began last year as part of a huge restructuring effort. He said that since he took over, HP has carefully analyzed its cost structure, down to knowing its IT costs by employee, site and function.

“We do understand our costs now more than we did a year ago,” Hurd said. But the company still needs to reduce costs and better efficiency, which Hurd vowed HP will achieve in the next several years.

Complicating this aim is HP’s acquisition strategy, as the company still is working to absorb companies it purchased in 2006. The company on Tuesday unveiled how it would integrate Mercury Interactive Corp., a software company HP acquired for US$4.5 billion on Nov. 7.

Hurd told securities analysts not to expect more acquisitions of this size in the future from HP, a comment that would appear to put an end to rumors that the company may buy security giant Symantec Corp. Instead, the company will make smaller acquisitions as they strategically and operationally make sense, he said.

Right before Hurd spoke, HP announced that it has agreed to acquire business intelligence services Knightsbridge Solutions Holdings Corp., a 700-person company, for an undisclosed sum.

Hurd made no mention of the boardroom scandal that hit the headlines in September, and which has former HP executives awaiting their fate in an ongoing criminal case that will decide whether they used illegal means to investigate journalists. Instead, he focused on operational efficiency and other goals on which HP continues to execute, including deriving revenue from a more diverse mix of sales and services and improving its sales and customer service.

Hurd also thanked HP Executive Vice President and Chief Financial Officer Bob Wayman for his 37 years of service at the company. On Monday, Wayman said he would retire, effective Jan 1. Catherine Lesjak, a 20-year HP veteran who currently serves as HP’s treasurer, will take over for Wayman upon his exit.

From a financial and perspective, HP weathered the scandal that rocked the company this year unscathed, earning nearly three times the profits in fiscal 2006, $6.2 billion, than it did in 2005, when the company earned $2.4 billion.

Hurd said HP still has more progress to make in terms of tapping its “total addressable market,” which he said in 2009 will be about a trillion dollars. “After careful analysis, we’ve decided that is big,” he deadpanned.

To achieve this aim, HP continues to try to improve its sales tactics, Hurd said. He said traditionally, HP ran on the theory that “if we build great technology, customers will find it.” Now, “we have this new advanced theory,” he said. “If we actually try to sell the stuff, we’ll actually get more revenue.”

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Jim Love, Chief Content Officer, IT World Canada

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