Too early to consider HP's breakup, says Hurd

Duncan Martell

PALO ALTO: Hewlett-Packard Co.'s newly appointed chief executive, Mark Hurd, said on Wednesday it was too early to consider spinning off the firm's lucrative printer business, a move that many investors and analysts have clamored for.

"I would prefer to analyze the situation ... before jumping to a conclusion like that," he said on a conference call with financial analysts in response to a question.

The CEO-designate, who officially starts on April 1, also said he had not decided whether he would hire a strong second in command or whether job cuts were in order.

"We'll look at the entire enterprise," he told a press conference at HP. "I can't give you any guarantees on anything."

Hurd, 48, who was the chief executive of NCR Corp. until Tuesday, faced repeated questions from Wall Street analysts over whether the world's second-largest computer company should spin off its printer business -- and perhaps split up its PC and business computer units as well.

Printing is HP's most profitable unit, and in light of IBM's spin-off of its personal computer business, analysts have argued that HP divisions might prosper more as separate companies.

Prior CEO Carly Fiorina, pushed out by the board, had repeatedly resisted calls for a printing division spin-off. The board indicated no preference for a split, however, even as it ousted her.

"The near-term prospects of (an HP break-up) are now reduced as the new CEO presumably evaluates," Bear Stearns analyst Andy Neff wrote in a note to clients. Instead, Hurd appears focused on improving the company's execution of its existing business plans, he said.

Other financial analysts said they were adopting a wait-and-see attitude to the new HP leader, noting that the Silicon Valley-based company faces a series of intractable competitive issues against highly focused rivals such as IBM, Dell Inc., Lexmark International Inc. and EMC Corp.

Hurd said during an early-morning conference call from California that he would not commit to a specific time frame for deciding when or if the structure of the company should fundamentally change.

During his tenure at NCR, Hurd reversed the company's fortunes in part by focusing on boosting margins and cutting costs, which included some job cuts.

Before becoming chief executive of NCR in March 2003, he was in charge of the company's Teradata data warehousing business.

Hurd said he was given "no preconditions" on strategy ahead of getting the job.

Merrill Lynch analyst Steve Milunovich, one of the few Wall Street analysts to follow both HP and NCR, said Hurd was a "good cultural fit" with the 66-year-old company.

"Hurd can be charismatic and aggressive but comes off as low-key. He is a blue-collar CEO, more interested in rolling up his sleeves to solve problems than appear in front of cameras," Milunovich wrote to his clients.

"His history indicates that he is willing to make tough decisions, such as exiting businesses and reducing health benefits for retirees," Milunovich said, adding that at NCR Hurd had ratcheted down Wall Street expectations in order to later post positive earnings surprises that pleased investors.