Fiorina to McNealy: What Gives?

Hey, Scott McNealy, Carly Fiorina has a question for you. The Hewlett-Packard Co. chief didn't squirm when Gartner Group Inc. analysts here in Lake Buena Vista, Florida on Monday passed along a query from an attendee at the ITxpo, wondering why it is that HP lags behind competitor Sun Microsystems.

Of course, she disagrees with that assessment and said so. Then, she was asked what she'd want to hear McNealy, chief executive officer of rival Sun, address during his keynote discussion with analysts on Tuesday and she responded, "If we're so far behind, why is Scott spending so much energy attacking HP?"

McNealy seems to spend much of his time during speeches and interviews bashing the competition, and undoubtedly will do so on Tuesday. But Monday's discussion was focused on HP, Fiorina and where she wants to take the company. One criticism of HP that Fiorina addressed soon after taking over the helm in July of 1999 was that many in the sales force were ineffective, didn't meet quotas or live up to standards.

Some salespeople were fired, others were moved around, but now the time has arrived to boost the staff. Starting at the beginning of next month, HP will hire 2,000 new employees to focus on customer service. Some will be salespeople, others in technical support.

The company further will continue its focus on offering products and services for the "always-on Internet infrastructure." That includes its initiative aimed at electronic services, with a combination of products and support. HP also will put more money into OpenView, its system management platform.

"I would agree with you that a big investment is necessary and we're prepared to make that investment," Fiorina said to $US500 million to $US1 billion in that effort.

One thing HP doesn't intend to do is to become an ASP (application service provider). Rather, HP will focus on providing products to ASPs and other service providers that will then lease software to customers who don't want to buy software.

"Fundamentally, we're not going to become a huge ASP ourselves," Fiorina said. "We think that puts us in conflict with our customers."

While it sharpens its strategy of providing offerings to ASPs and others, HP will continue to push its PC business. The company currently is third in global PC market share, but hopes to capture the top slot in the future, Fiorina said. Although much has been made of the downturn in the PC market, Fiorina said there is a tendency to be too U.S.-centric when it comes to viewing that market. What's more, while the corporate desktop market is slowing, "our notebook business is on fire," she said, adding that HP believes that area is growing for the company at five times the industry rate.

Analysts asked Fiorina about HP's possible acquisition of Pricewaterhouse Coopers LLP's consulting division. HP has been in talks to purchase the consulting division, but Fiorina said that much work remains before that deal could become reality. News that the companies were in merger talks was leaked to the media and so HP confirmed the discussions.

Some HP customers see the move as an odd fit and question why HP would want to acquire a consultancy. It's a falsehood that vendors don't have relationships with consultancies, Fiorina said. HP has some 6,000 consultants internally now, she said, and has been hiring about 300 new people in that role per quarter. The focus of the proposed acquisition is "business transformation and IT implementation" and helping HP customers achieve both, she said.

One thing HP will not do is make "bold" marketing statements that it cannot deliver on, she said.

"I think our customers have the right to know what we can do and what we can't do," Fiorina said, poking fun at a talk McNealy gave at a trade show recently in which he took a page from the hit TV show, "Survivor," complete with a deserted island theme.

"Marketing done well," she said, "is not mudslinging."

The Gartner Group ITxpo continues here through Friday afternoon.

Additional information can be found at http://www.gartner.com/.

Gartner Group, based in Stamford, Connecticut, can be reached at http://www.gartner.com/.

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