Hewlett-Packard Watchers Fret R&D Shift

A nagging question has dogged Mark Hurd's revival of Hewlett-Packard(HPQ Quote).

While Hurd's knack for cutting costs and boosting profit margins has won him goodwill on Wall Street, H-P's chief executive has yet to articulate how he intends to grow the company's top line beyond the mid-single-digit level.

Investors perusing the company's latest annual report found more cause for concern: For the fifth year in a row, H-P's spending on research and development declined as a percentage of total revenue.

H-P spent $3.6 billion on R&D in its fiscal year ended Oct. 31, 2006, or 3.9% of revenue. That's hardly chump change, but it's down from the 6% that H-P spent on R&D in 2002. ...