Gartner: HP could restructure

By Paul Vecchiatto for HP

Cape Town, 31 Mar 2005

HP`s new CEO Mark Hurd can be expected to restructure the company into four or five business units to focus on basic operations, says international research firm Gartner. This restructuring will place Hurd firmly in control.

Hurd was named as the new CEO and president of HP yesterday. He previously headed NCR and is credited with turning the company around and tripling its share price. Hurd is regarded as the antithesis of his HP predecessor Carly Fiorina, who had a high public profile following the acrimonious merger with Compaq.

Gartner analysts Martin Reynolds and Andrew Butler say Hurd has told them that his organisational priorities are to bring simplicity, focus, clarity and accountability to HP.

"We agree," the analysts say.

"At NCR, Hurd demonstrated the ability to control costs and restore growth. This is clearly the reason HP selected him. Grasping the diversity of HP`s business is a challenge in itself. Hurd must be able to deal with the single-digit margins of the PC and computer businesses without being distracted by the 80% margins in printer supplies."

The Gartner analysts say HP, with $55 billion a year in hardware revenue, has the largest IT hardware business in the world, but could lose that position to rival Dell.

"Dell`s hardware business, based on standardised products, is growing faster and is more profitable," they say.

Gartner expects HP to form separate business units for PCs, printers, enterprise hardware, services and possibly consumer electronics.

Gartner recommends that HP clients watch the company carefully as Hurd implements cost-cutting plans. The research firm believes most HP product strategies are unlikely to change, although some low-profile products and services may disappear.

"In particular, we expect HP`s consumer electronics products, which have high entry costs and low returns, to be affected," the Gartner analysts say.

BMI-T: HP needs Hurd

Mark Walker, director at local research firm BMI-TechKnowledge, says Hurd`s appointment is probably exactly what HP needs after the seemingly flamboyant tenure of Fiorina.

"They don`t need a rock star. HP needs an operationally focused person at the helm."

Walker says Hurd has stated he will focus on three issues: operational efficiency, creating demand for HP`s technology and shareholder value.

"This may be easier said than done. NCR was a much smaller business and so easier to focus, while HP is a far larger and more diverse group."

Walker expects Hurd to surround himself with a group of loyal lieutenants, possibly some from NCR, and then go into a planning stage that will stretch over a number of weeks, before announcing any new strategies.