In his first meeting with Wall Street analysts as Hewlett-Packard's (HP's) new leader, incoming Chief Executive Officer (CEO) Mark Hurd steadfastly refused to map out his plans for the company's direction. Hurd, who will officially assume the position on Friday, said he will spend the next few months learning about HP before he crafts a strategy for running it.
Analysts on Wednesday morning's conference call repeatedly pressed Hurd on whether he would consider breaking up HP, by spinning off either its lucrative printing group or its struggling PC division. Hurd said he won't answer that question until he's had more time to study HP, but he suggested that he would prefer to appease shareholders looking for investment gains by improving HP's overall performance, rather than by selling off pieces of the company. HP Chairman Patricia Dunn repeated the board's previous statements that HP's CEO switch is about changing the company's operational performance, not its strategy.
During a press event later in the day at HP's Palo Alto, California, headquarters, Hurd said that it was premature to talk about spinning off the company's businesses. "I got here at 9 o'clock last night," he said. "I didn't spend a lot of time working on spin-offs."
At Hurd's first meeting with HP executives early Wednesday morning, the topic of spinning off the company's businesses was not discussed, according to Shane Robison, HP's executive vice president and chief strategy and technology officer. "It's just you guys who are focused on it," he said to reporters. "It didn't come up."
Robison said his initial impression of Hurd was favorable. "I like him a lot," he said. "He's got the right focus on operations. And style-wise, he's going to be very open in how he runs the business and communications."
Hurd, 48, comes to HP with a reputation as a cost-cutter devoted to bottom-line efficiencies. He brushed aside a question about whether he would consider workforce reductions at HP, saying he needs more time to determine that, but he said operational excellence will remain his priority.
"I believe in an execution-oriented culture," Hurd said. "I believe in setting clear goals, implementing tactical plans, and holding people accountable."
HP has already shed several top executives who didn't live up to expectations: Then-CEO Carly Fiorina fired three major sales executives, including long-time Compaq executive Peter Blackmore, last year after HP suffered through a poor quarter. HP's leadership has also cut more than 17,000 jobs from the company since it acquired Compaq in 2002.
According to HP's chairman, the board has not given Hurd a specific timetable in which he must produce results. "The biggest challenge is to get to feel at home in the culture," Dunn said.
Several of HP's remaining top managers were considered likely candidates for the CEO job given to Hurd, including storage, servers and services group head Ann Livermore and printing and imaging business head Vyomesh Joshi. Hurd deflected a question on Wednesday's call about how he will retain such executives, and about his plans for HP's senior leadership. Hurd said he hadn't yet met the company's senior executives, but would do so later Wednesday. "I believe very much in organic promotion," he said.
HP is paying handsomely for Hurd's services. Hurd will receive a base salary of US$1.4 million a year and a target annual bonus of at least US$2.8 million and as much as US$8.4 million, according to an employment agreement HP included Tuesday in a regulatory filing. Hurd will also be eligible for several million in long-term performance bonuses if certain targets are met, and he has been granted options on 700,000 shares of HP stock, at an exercise price around the average trading price of HP shares on April 1, the day he officially begins his new job. Additionally, HP is granting Hurd a US$2 million signing bonus, a US$2.75 million relocation allowance and options and stock to cover compensation forfeited by his departure from NCR.
Financial analysts generally responded favorably to Hurd's appointment, with some reservations about his relative obscurity. At NCR, where he worked for 25 years, Hurd ran a company with annual revenue of US$6 billion. HP generated US$80 billion last year.
"[Hurd] doesn't have experience running a company of HP's size and complexity, not to mention competitive challenges," Prudential Equity Group analyst Steve Fortuna wrote in a research note Tuesday. "We would simply characterize the competitive landscape facing HP as brutal, with both Dell and IBM executing the enterprise hardware bookends nearly flawlessly."