Alexei Oreskovic
Intent on continuing a turnaround that has boosted the stock nearly 40% in the last six months, Hewlett-Packard(HPQ Quote - Cramer on HPQ - Stock Picks) CEO Mark Hurd said the company's recipe for maintaining success will have two main ingredients: aggressive attention to costs and a focus on high-margin markets.
In his first analysts day presentation in New York since taking the helm of H-P in March, Hurd didn't lay out any major changes in strategy, so much as fill in the company's existing blueprint with new details and shading. Hurd told analysts that when he first joined H-P in March 2005, following the ouster of former CEO Carly Fiorina, he found a company slow to make decisions and was seen as tough to do business with by customers. While the company had managed to continue growing revenue over the years, much of that growth was coming from lower-margin products, which was eroding overall gross margin. On the other hand, Hurd said, the technology, brand and the desire to win among H-P employees were incredibly strong. Hurd's most drastic initial move, cutting 10% of the workforce, or about 15,000 employees, resulted in a massive $1.6 billion charge, most of which was recorded in the fourth quarter. The company projects about $2.07 billion in savings from the action in fiscal 2007, of which half is estimated to fall through to operating profit. Hurd identified three main trends driving H-P's growth going forward: the automation of corporate data centers, the increasing importance of mobile computing and the ubiquity of printing. "These market trends are going to happen with or without H-P, and I believe they do play to our strengths," said Hurd. The company said revenue for fiscal 2006 will range between $89.5 billion and $91 billion, with earnings excluding stock option costs, of $1.88 to $1.95 a share. Analysts polled by Thomson First Call had been expecting revenue of $90.9 billion and earnings of $1.82 a share.
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