Can HP win doing it the Hurd way?
FORTUNE 500: A sales-trained CEO is trying to reboot Hewlett Packard. Goodbye sizzle, hello business wonkery.
NEW YORK (FORTUNE) - All you really need to know about how Mark Hurd approaches his job as the chief executive of Hewlett-Packard (Research) is to listen to his description of the process of selling. He calls it "selling as defined in the organic portfolio exploitation sales-process kind of selling." Goodbye sizzle, hello business wonkery.
What excited Carly Fiorina, Hurd's deposed predecessor, was inspirational visions of an increasingly interconnected world. Hurd gets
jazzed by diving into sales numbers -- he jokes about "interrogating the data until it confesses." Fiorina loved the limelight; Hurd didn't want to be on the cover of this magazine.
Fiorina owned Davos, the annual teach-in for plutocrats in the Swiss Alps; Hurd skipped this year's session, citing "customer commitments." Fiorina was always on message; Hurd is sales optimization in a suit. (This is an excerpt from a story in the April 17 issue of FORTUNE. To read the complete story, click here or go to www.fortune.com.)
Indeed, from the avuncular way he lets his rimless glasses perch at the end of his nose to his straight-talk emphasis on fundamentals, Hurd evokes another tech industry turnaround maestro, Lou Gerstner, the former IBM (Research) boss who famously said, "The last thing IBM needs right now is a vision."
Like Gerstner, Hurd is reviving a sales culture that had waned over the years. During the Fiorina era, HP had engineering prowess and marketing razzle-dazzle, yes. But legions of crafty sales mercenaries? Not so much.
And so Hurd is in the process of taking a crowbar to the company Fiorina left him. He broke up the centralized selling group, which Fiorina had created, because he judged that it caused more problems than it solved. He reversed a Fiorina decision to combine printers and PCs, figuring that the problematic PC unit needs its own care and feeding.
Hurd is chopping elsewhere as well. Despite 26,600 layoffs in the aftermath of the Compaq merger, Hurd confronted a company that was still bloated. So he's axing 15,300 additional jobs, about 10 percent of the total; trimming R&D cutting back on HP's "e-inclusion" program, which promotes computing in the developing world; and freezing pension benefits, a move that puts HP in line with most of the high-tech industry but markedly out of step with its generous, paternalistic past. (Through a spokeswoman, Fiorina declined to comment on her successor other than to wish him well.)
Hurd has also brought in new blood at HP's highest levels, hiring executives from Siemens, PalmOne, and Dell (Research), whose former chief information officer is rewiring HP's internal technology setup.
Just as important have been the top executives he's kept, specifically the operating chiefs of two of HP's three major divisions -- Ann Livermore and Vyomesh Joshi, who run the enterprise computing and printing groups, respectively. (An import, ex--PalmOne CEO Todd Bradley, heads the PC unit.)
Each of these businesses independently would win a place on the FORTUNE 500. (HP as a whole clocks in at No. 11.) Hurd believes that once he finishes fixing HP, his lieutenants will have tremendous horsepower at their disposal.
One year into the Hurd era, the organic portfolio exploitation process seems well underway. In HP's most recent quarter, operating profits were up 29 percent from the year before. If the company hits Wall Street's targets this year -- it has exceeded expectations every time it has reported under Hurd -- it will post profits of $5.6 billion on sales of $91 billion.
Six percent margins are nothing to brag about, unless you consider where HP has been. The company's long-suffering share price, at $33, is up about 65 percent since Hurd was named CEO at the end of March last year, about seven weeks after the HP board sacked Fiorina. That's still way off its high of $67 in 2000, but at least the market now seems convinced that HP has shed its former tendency to overpromise and underdeliver.
This is an excerpt from a story in the April 17 issue of FORTUNE. To read the complete story, click here or go to www.fortune.com.Next: See the 2006 FORTUNE 500
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