Cost-cutting remains crucial for HP's growth: Hurd

CEO charts the company's course at analyst meeting

Cutting costs will continue to be a top priority at Hewlett-Packard for the foreseeable future, as the company aims to offer infrastructure and services to capitalise on what it sees as a US$1.2 trillion (NZ$1.54 trillion) market in digital content, HP CEO Mark Hurd said yesterday.

At a meeting of financial analysts in New York, Hurd said that despite efforts to reduce the amount of money HP spends on operations, products and services, it still spends millions of dollars per hour. The good news for HP is that it has identified three major areas of cost — business processes, products and shared services — and "we're beginning to get under each of these cost areas," Hurd said.

"We have costs to work on, costs to get out of the company," he said. "Cost structure, excess cost, kills you in a number of dimensions."

Even as HP works to cut costs, it also aims to grow, Hurd said. The company has been performing well in the market under the leadership of Hurd, who took over the company in April 2005 after the HP board dismissed beleaguered former CEO Carly Fiorina.

"It's important we grow, but it’s important we grow the right way," he said. Balancing the company's revenue mix between its key products segments — software, servers, PCs and printers — as well as its services business, is a key goal for the company, Hurd said.

"Optimising that portfolio will be just as important to us as the revenue growth number you see from the company," he said.

Hurd said that people's growing desire to have access to as much information as possible via digital content whenever and wherever they are "creates pressure on IT infrastructure, pressure that turns into opportunity". IT trends that are growing out of this pressure, such as virtualisation, server consolidation and application modernisation, are all areas of disruption HP can use to sell its products and services, he said.

Still, the company faces challenges as it tries to grow. In addition to cost-cutting, another significant problem for HP is its sales coverage, as the company is currently "under-represented" in the market, Hurd said

HP added 2,000 employees to its sales team last year, yet it still needs to do more, which is no easy task, Hurd said. "It sounds simpler than it is to hire up a sales organisation," he said. "But it's probably the toughest thing we’re going to get done with our DNA."

Following Hurd's presentation, HP chief financial officer Cathie Lesjak revealed for the first time the company's financial outlook for its 2009 fiscal year. The company expects to grow its revenue -- forecast to be in the range of US$117.1 billion to US$118.2 billion -- 5-6% per cent year over year. Non-GAAP earnings per share for 2009 are expected to be between US$3.74 to US$3.84. HP is currently in the first quarter of its fiscal year 2008; 2009 begins on November 1, 2008.

For 2008, HP is forecasting revenue of about US$111.5 billion and earnings per share in the range of US$3.32 to US$3.37. For its fiscal year 2007 ended October 31, HP reported profit of US$9.6 billion on US$104.3 billion revenue.

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