HP Plots New Course

So, after weeks of speculation about a management schism at Hewlett-Packard Co. (NYSE: HPQ), Carly Fiorina has stepped down as the companys CEO, at the board's request (see HP CEO Steps Down).

Speaking on a conference call this morning, HP board members admitted they asked Fiorina to step down. This followed weeks of deliberation amongst board members, according to HP director Patricia Dunn.

HP execs on the call said that no single event prompted the decision to oust Fiorina, although they admitted that there were differences between the board and Fiorina on the issue of "execution."

The Palo Alto, Calif., firm recently announced plans to reorganize its business, by combining its PC and printing divisions. However, other parts of the HP empire are currently under-performing and could be in line for an overhaul, including its storage business.

This was particularly evident in the company’s recent financial results. For the third quarter of 2004, HP’s revenues from enterprise servers and storage were down 5 percent year over year. At the time, HP admitted that its storage business was "significantly below plan."Although figures improved during the following quarter, the company’s interim CEO Bob Wayman still felt compelled to voice his concern during today’s call. “Storage has been losing market share, and we fell a lot behind in terms of the product roadmap,” he said.

It now looks as if HP is planning to make some changes to its storage business, with Wayman promising to “fix the mistakes” by focusing on the division’s management team and its management processes. This, he contends, will drive an improvement in bottom-line profitability.

One industry analyst, who asked not to be named, says HP is likely to focus predominantly on its OEM business in storage and may eventually consider ditching further development of its own wares, despite plans to launch a new midrange series in June. "I mean, you look at what they've done lately and ask, 'What's going on here?' " the analyst says.

Still more changes are likely to come in the company’s PC and managed services businesses. With HP feeling pressure from Dell Computer Corp. (Nasdaq: DELL) and Gateway Inc. on PCs, an exec on the call said that HP is planning to “grow the top line and execute a geographic expansion.”

In managed services, which has recently undergone 30 to 40 percent growth, the company is looking for a better balance between its top and bottom lines, according to execs.But longer term, there is also a feeling that HP needs to do a better job of marketing its products, particularly in the high-end server space, where it faces stiff competition from the likes of IBM Corp. (NYSE: IBM) and Sun Microsystems Inc. (Nasdaq: SUNW).

Colin Butcher, technical director at consulting firm XDelta Ltd. told NDCF that there is still room for improvement. “I would like to see more emphasis on the enterprise-class systems,” he says.

HP has a strong heritage in this part of the market, according to Butcher, with the likes of its Integrity, its Alpha servers, and its VMS operating system.

”They could do more, in my view, to emphasize these high-end, mission-critical, disaster-tolerant systems,” he adds.

— James Rogers, Site Editor, Next-Gen Data Center Forum0