As Hewlett-Packard (HP), the world's largest PC maker, announced its decision to purchase Electronic Data Systems (EDS) in a deal worth $13.9 bn, it must have been more satisfying for Carly Fiorina, the ex-boss of HP, than anyone else at the Paulo Alto, California-based company. The firebrand, former HP CEO's acquisitive growth strategy that the way to grow ahead for the company is big bang acquisitions and not plain vanilla organic route—which was opposed vehemently by the PC maker's founding family—now stands vindicated. Nevertheless, the all-cash deal poses daunting challenges to the leadership of Mark Hurd, who skillfully turned around HP post its troubled acquisition of Compaq in 2001 that cost Fiorina her job, as shareholders blamed her for bringing HP to the lowest point in its history. The problem, many analysts say, is that Hurd is essentially an operations guy and not the visionary type a la his predecessor, Fiorina. A 25-year NCR veteran during his long stint in the industry, Hurd has won a reputation as a cost-cutter, but lacks a track record as a visionary in the high-tech business. "The last thing HP wants is a great visionary; it needs discipline to articulate how to take on the competition," remarked Philip Fersht, Vice-President at research firm, Yankee Group, as Hurd took the reins of HP in April 2005.
True to his reputation, Hurd went on a major cost-cutting drive that saw him slash 14,500 jobs or 10% of HP's workforce, pare retirement benefits, and cut down spending on the data centers, real estate and even file cabinets. Thanks to these efforts, HP began its remarkable recovery "from a nagging financial hangover that was exacerbated by the biggest acquisition in its 69-year history—the $19 bn purchase of Compaq Computer Corp., completed in 2002 over strident shareholder objections," as Michael Liedtke of The Associated Press put it. Since Hurd's arrival, HP's stock price has more than doubled, while its annual revenue soared past $104 bn in fiscal 2007—the only information technology firm in the world to have achieved that feat. Also, he successfully boosted the firm's earnings which grew 17% to touch $7.3 bn during the same period, owing to a combination of prudent cost-cutting as well as margin expansion. HP also toppled Dell in 2006 to reclaim its top spot as the global PC vendor and has consistently met or bettered Wall Street's expectations. |
