HP vs. Everybody

The path to growth is blocked by Cisco and IBM. CEO Mark Hurd must now take them on

By Kathleen Kingsbury Monday, Apr. 26, 2010
    • Illustration by Josue Evilla for TIME

    CEO of Hewlett Packard, Mark Hurd.

    Be inconspicuous. If there's one tenet of the legendary corporate culture known as the HP Way that CEO Mark Hurd has mastered, that's it. Known as a numbers guy who shirks the limelight, Hurd has practically channeled founding fathers Dave Packard and Bill Hewlett in his focus on how best to arm his 300,000-plus employees — and then get out of their way.

    No wonder, then, that HP's recent strategy to take on all comers has put some of its biggest rivals on the defensive. Just ask Dell, which HP leapfrogged to become the world's largest PC maker. Or IBM and Cisco, whose respective IT consulting and networking supremacies Hurd has in his sights. Even Apple isn't immune; HP's forthcoming Slate tablet has been hailed as the best potential iPad killer out there.

    HP, of course, is no underdog. The Silicon Valley institution's newfound swagger is backed by results: it has been the biggest player in the $1.7 trillion technology market for nearly five years. Earnings have grown, on average, 55% annually since 2005; last year the firm's net earnings were $7.7 billion on revenue of $115 billion.

    Indeed, under Hurd's watch, HP has worked to transform itself from an underperforming printer manufacturer into a profitable IT-services supermarket. What's more, the company has proved it is ready to trim where needed, dive quickly into promising new arenas and, when necessary, acquire the means to go head to head with formidable foes. "In a short time, Mark has identified opportunities worth trillions of dollars, convinced his people to go after them and led the pursuit with vigor and financial acumen," says Robert Burgelman, a Stanford University professor who has studied HP closely for the past 11 years. "He has an incredible ability to see value where others don't."

    Data is what everyone in the geek world that HP inhabits is eyeing at the moment. Or more precisely, how users — whether they're Fortune 500 companies, garage bands or housewives — access, store and consume millions of megabytes of electronic information each day. Thanks to innovations such as smart phones and cloud computing, getting customers the data they need quickly and efficiently has become an increasingly complex and valuable proposition for HP and its competitors. Consider, for instance, that consumers are expected to buy 30% more netbooks and slate PCs in 2010, boosting the total to more than 40 million sold. "Every single firm is going after that next billion users," Needham & Co. analyst Richard Kugele says. "They have the potential to generate a surge in storage and infrastructure unlike the world has ever seen."

    That HP could be a contender to lead this charge would have been unthinkable five years ago. Sure, the HP legend is still the alpha start-up story: in 1939, Hewlett and Packard, two Stanford-trained engineers, launched the business from a rented Palo Alto, Calif., garage. And despite a beginning in automatic urinal flushers and harmonica tuners, the pair went on to develop a business in test instruments like oscilloscopes. They also invented the pocket calculator, the ink-jet printer and the basic user's manual for the Silicon Valley companies that followed.

    Yet as HP got bigger, it began to lose its innovative edge. So in 1999 the HP board hired firebrand CEO Carly Fiorina from Lucent Technologies (she's now a GOP candidate for the U.S. Senate in California) to stage a comeback. Fiorina's vision made her a darling of HP directors, investors and media. She even spun off Dave and Bill's test-instrument division.

    Execution was not, however, a strong suit. Her strengths and weaknesses were on display in the tumultuous 2002 acquisition of PC manufacturer Compaq. Although making the deal may have been strategically shrewd, Fiorina couldn't deliver its promise of bringing HP more market share at lower cost. She was forced out in early 2005, concluding one of the most dramatic corporate soap operas ever witnessed.

    Hurd took over Fiorina's game plan. He was, to many, the anti-Carly — a finance hawk who'd perfected his operational prowess and Midwestern sensibility as CEO of Ohio-based ATM manufacturer NCR, once known as National Cash Register, another tech company with a long pedigree. "Whereas Carly tended to do brilliant Hail Marys that didn't quite connect, Mark was an execution master," says Rob Enderle, a tech analyst in San Jose, Calif. "He basically took Carly's strategy and finally got it done."

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