H-P Investors Await Hurd Mentality
Shares of
Hewlett-Packard
(HPQ) - Get Report
trailed the market's rise Wednesday as investors balked at moving the stock substantially beyond
Tuesday's gains, which were spurred by the naming of Mark Hurd as chief executive.
The lag suggests that a further rise will be based on measurable improvements at the technology stalwart, which is neither a small nor easy matter.
During Hurd's two press conferences Wednesday -- one for investors and one for media -- he said everything he was expected to say. He avoided questions about breaking up the company, he avoided saying layoffs were inevitable and he avoided offering his own definitions of H-P's biggest problem areas.
All in all, it was a pretty good day for someone who didn't arrive in Silicon Valley until Monday evening and doesn't even officially start work until Friday.
Hurd did say he has been researching everything he can find during the past couple of weeks about H-P, from analyst reports to public filings to media stories. While the substance of what he's uncovered remains unclear, his statements on Wednesday largely served to reinforce his image as an operations guru who wants to understand each business unit at H-P and deal with each on its merits.
Hurd doesn't carry as high a profile as Carly Fiorina and hasn't run a company as large as H-P, which analysts have taken to indicate that he'll work quickly and methodically to right the wrongs at H-P and that he'll be more beholden to the board.
"The H-P board is taking a very hands-on approach to the company now and they basically wanted someone who is skilled and talented, but also someone who will be answering to the board in a direct way," said Charles King, principal with Pund-IT Research. "I think that's good news for the company. H-P is now at a point where any misstep will be discerned as a big misstep. They need to do everything they can to keep the company on track."
That's not an understatement. H-P is under assault from hyper-efficient
Dell
(DELL) - Get Report
and momentum-riding
IBM
(IBM) - Get Report
. By comparison, H-P's stock is flat not only from this time three years ago, but from this time eight years ago.
However, to see the very definition of understatement is to look at Hurd's opening remarks from his Wednesday press conference: "I can see that this company is fundamentally sound, that the balance sheet is strong, that it generates substantial cash, and that it's a leader in a great many product categories and services. It's also clear that this company is not performing to its potential."
Hurd did note that he favors return on invested capital and gross margins as key indicators. That's a good thing because H-P's margins
have been under assault of late. They've even become an issue in its key printer and imaging segment -- the unit that generated 70% of H-P's profit last year.
However, it seems likely that Hurd will make most of his early noise inside the company and not through the media. While the company's May 17 earnings call might mark the first public indications of Hurd's plans, it's even more likely he'll unveil his intended direction at an analyst meeting on June 15 in New York City.
At that point, Hurd will have had nearly a quarter of H-P service -- a decent amount of time for investors to expect direct answers to questions regarding spinoffs, layoffs and the ultimate road to higher profit.