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March 30, 2005

HP’s (Quote, Chart) new CEO said he is looking forward to jumping underneath the hood at the computer and printer maker and getting his hands dirty.

Mark Hurd, who was named to the post Tuesday, is being characterized as a blue-collar CEO, more interested in rolling up his sleeves to solve problems than appearing in front of cameras, something his predecessor Carly Fiorina was often accused of.

“I believe in an execution-oriented culture. I believe in setting clear goals, implementing tactical plans and holding people accountable,” Hurd said during a conference call with analysts and press.

Mark Hurd Source: NCR

Before arriving in Silicon Valley late last night, Hurd said he read as much as he could about the company, including “The HP Way,” and is looking forward to meeting with HP senior executives to discuss ways of making the company more competitive against Dell (Quote, Chart) and IBM (Quote, Chart).

“There are five separate unique operating models at NCR similar to the situation we have at HP and I don’t know any other way to do it other than to get underneath every piece of the business,” Hurd said. “However, it would be wrong for me to try to take the formula that I used at NCR and apply it to HP and imagine that it will work perfectly.”

Hurd faces many challenges in taking the reins at HP. The company has been suffering from inconsistent earnings and second billing to IBM. HP has also been frustrated by its inability to clearly articulate its Adaptive Enterprise strategy as it relates to IBM’s e-business on-demand plan for next-generation computing.

Experts say that consumption and integration is still affecting HP today, and the company has had several significant restructurings in the last two years, the most recent being a merger of the its printer and PC businesses.

One action plan Hurd may consider is spinning off the various business units to remain competitive.

Merrill Lynch analyst Steven Milunovich, who originally suggested that HP should break up, said Hurd would need to be a strong strategist in deciding which businesses to emphasize and which to cut back.

“Mr. Hurd is a pragmatist,” Milunovich said in his newsletter to investors. “Unlike prior NCR management, he did not argue that there were significant synergies among NCR’s three businesses. Nor did he rule out a break-up, though he considered it a last alternative.”

Hurd and HP chairman Patricia Dunn said that his hiring was not dependent on keeping the company in one piece.

“Any discussion about breaking up the company is misplaced. The real discussion is where are the opportunities for this company to perform,” Hurd said.

When asked if the biggest challenge for HP was an internal one, such as its operating costs, or an external influence, such as Dell, Hurd said he would take as much time as necessary to analyze the company before making any widespread decisions on its direction.

“While I have read a lot, there is only so much you can gather from the outside. You really need to be involved, but I don’t think you will find me trying to do anything tricky,” Hurd said.

One benefit with bringing Hurd onboard at HP is his history of running NCR’s server, PC and services businesses before becoming its CEO.

“He may be able to fix the enterprise business,” Milunovich said. “Enterprise systems is the most important swing factor in earnings; Mr. Hurd’s background is in the computer business. We expect he will have impact by focusing the marketing message, rationalizing products while adding software and services capabilities, and watching costs.”

Another challenge facing Hurd is the question of outsourcing. While he was head of NCR, Hurd said that dealing with 137 different countries necessitated sending some business practices outside the core companies. He said he was also aware of similar practices at HP and would maintain current outsourcing projects for now.

“There are competencies in critical mass, but on the flip side, it is nice to have a say in your future,” Hurd said. “We will continue to do a little bit of both. We are a global company, so in some ways you are taking some practices from the U.S. and exchanging that with the rest of the world, and then you reverse that process. In the end, it is how you optimized the company’s assets that counts.”

One thing Hurd can look forward to is a hefty salary to accompany his task of running HP.

According to filings with the Securities and Exchange Commission, Hurd will get an annual base salary of $1.4 million and an option to buy 700,000 shares of HP common stock. Hurd also collects $2 million in a signing bonus as part of his four-year contract.

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