HP is more than just hardware, says Fiorina

One of the things about Hewlett-Packard (HP) that distresses its chief executive officer, Carly Fiorina, is its reputation as a hardware company.

"Frequently, much to my chagrin, HP is described as a hardware company, but more and more of the value we deliver is in software," she told Gartner analysts on Thursday. She was speaking with them during a keynote interview at Gartner's Symposium/ITxpo conference and exhibition in Cannes.

"We've gone through a major transformation among our engineering staff from principally hardware to principally software," she said.

Software is now so important to HP that it will in the future report revenue from its OpenView family of management tools separately. OpenView will evolve to encompass application management and business process management, strengthened by eight recent acquisitions in this area, she said.

With the increasing importance of software, some might doubt HP's continuing commitment to building PCs -- but that activity will continue as long as HP can make money at it.

"I don't believe in strategic businesses if 'strategic' is code for losing money," Fiorina said. "That's why we've been working hard to bring our PC business back to profit."

HP's PC business doesn't offer such high margins as its software business, she said, "but it's a good business, with an adequate return on capital."

The desktop PC is also an opportunity for HP to sell enterprise software, giving it a vital foot in the door when visiting enterprise customers.

"To get into businesses to talk about the adaptive enterprise, one of the places we start is desktop management," Fiorina said.

The company's experience with PCs is also key to its success in the consumer electronics business.

"Our PC business plays a vital role in our ability to deliver digital content in the home," she said.

HP's first entered this market as a home office computer supplier, while traditional consumer electronics manufacturers delivered to the living room. Now those two are converging, bringing HP into competition with Sony, Fiorina said.

Where many other consumer electronics manufacturers have focused on "gizmos and gadgets," HP aims to focus on doing what Fiorina thinks "other consumer electronics companies don't do as well as we do." This would be, according to Fiorina, the horizontal integration of content creation, distribution and consumption.

Consumer products account for around US$20 billion of HP's annual revenue of $80 billion, Fiorina said.

Fiorina declined to comment on HP's current financial performance, saying the company is "in a quiet period" before publicizing its fiscal year's fourth-quarter results. However, the problems that blighted the company's third quarter are behind it, she said.

Those problems stemmed from a failure to "execute on two systems and process transitions" related to the acquisition of Compaq Computer, one in the U.S. and one in Europe. The company completed 35 similar transitions, but on those two, "People were working on parts of the issue and there were some connections that got missed. We think we understand it and we have dealt with it," Fiorina said.

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