Hurd's HP legacy: Dell racer, IBM chaser

Man executing on another's plan

By Timothy Prickett Morgan • Get more from this author

Somewhere in California, Carly Fiorina must nearly have choked to death from laughter while stumping for a US Senate seat as news of her successor's sudden departure broke following a sexual-harassment probe.

It has not been an easy five years for Mark Hurd, the former president, chief executive officer, and chairman of HP, the largest IT vendor in the world. Hurd, who took over as CEO in the wake of the topsy-turvy reign of Carly Fiorina in 2005, came in from staid NCR and made HP a little more predictable, financially. Something Wall Street and HP customers alike wanted very much.

The tough tasks of making the HP-Compaq merger work in a radically changing, post-dot-com IT environment and building up HP's software and services business — goals set by Fiorina shortly after she came into HP from the outside as president in 1999 — fell to Hurd.

Fiorina tried and failed to buy the IT consultant PricewaterhouseCoopers, eventually eaten by IBM. HP under Hurd recovered from that mistake by eating EDS in May 2008 for $13.9bn.

Over the past five years, Hurd can take credit for an improved PC business, a steady printer and consumables business, and a rationalized and growing server business where HP is now both the shipment and revenue leader. The expansive plan to turn HP into a real IT player might have been all Fiorina flair, but the execution — done with a magnifying glass, sharp pencil, and a pair of pliers — was pure Hurd.

Hurd had a reputation as a tough cost-cutter when he ran NCR, and he didn't soften any when he left Dayton, Ohio in 2005 for Palo Alto, California.

Soon after taking over as CEO in the spring of 2005, Hurd cut 10 per cent of the workforce, or 15,200 people. And in the wake of the EDS acquisition, 24,600 jobs got put on the block, and Hurd pressed for voluntary pay cuts for employees in Europe while at the same time raking in $24.2m in compensation for himself. In 2008, Hurd took in $33.9m.

HP could — and did — immediately cut pay in February 2009 by between five and 15 per cent for employees in the US during the economic meltdown. Hurd took a 20 per cent pay cut, just to show he was one of the boys. But Hurd was not hurting for cash — certainly not enough to fudge his expense reports, which is one of the reasons why he was forced to resign.

A year after Hurd came on board, HP wrested control of the desktop PC business back from archrival Dell, and a year later HP took the market-share lead for notebooks. As HP was managing to get its act together in the PC business, Dell was busy selling PCs it knew were crap and doing everything it could to keep the bags of cash coming in from Intel. Predictably, Dell's business suffered as much from its own missteps as it did from HP's resurgence.

By the math, the merged HP and Compaq should have immediately been the king of servers in terms of revenues, topping Big Blue — a feat no one had ever accomplished in the history of the systems business.

But the HP-Compaq systems merger coincided with a radical shift away from big and expensive proprietary and Unix machines and towards cheaper boxes running Unix and Linux, so it took considerably longer than planned for HP to catch up to and topple IBM.

But thanks to IBM's revenue dropping because of mainframe and Power Systems transitions and x64-based servers rebounding, HP finally bested IBM in server revenues in the first quarter of this year — nearly a decade after the Compaq deal was announced.

It's very unlikely that this will hold in the fourth quarter, when IBM should post some impressive mainframe and Power Systems sales. But anything goes for 2011, and the safe money is on HP maintaining and extending its lead on IBM in the server racket.

It will take considerably longer — how does infinity sound? — for HP's services business to catch up with Big Blue's. In its fiscal 2009 ended in October last year, HP had sales of $114.6bn, but services were only $8.9bn of that.

IBM, by contrast, had sales of $103.6bn in calendar, but $58.9bn of that was for services. And yes, Fiorina was right: HP should have bought that PwC consulting business, which generated $19.6bn in sales for Big Blue in calendar 2009.

Lesjak in charge - for now

Now, Cathie Lesjak, who has been HP's chief financial officer since January 2007, has been handed the reins that were yanked out of Hurd's hands by the HP board of directors. That's just as what happened to Bob Wayman, HP's long-time CFO, who was handed the reins to become interim CEO when the board gave Fiorina the bounce in 2005 and began the search that resulted in Hurd being brought over from NCR. Lesjak has already said she will not do the CEO job.

Lesjak will be in charge of reporting HP's financials on August 19 all by her lonesome, something she was no doubt not expecting. To try to soothe a jumpy Wall Street, HP released preliminary financial results for the third quarter of fiscal 2010 ended in July.

The company said revenues would be between $32.5bn and $32.7bn and earnings per share would come in at between $1.03 and $1.05. HP expects revenues for the full fiscal 2010 to be $125.3bn and $125.5bn, with EPS of $3.62 to $3.64. Those are some pretty tight numbers, and they show just how confident HP is in its business.

As for Hurd, there's always politics. ®

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Related stories

• HP's Hurd quits quickly on sexual harassment probe (6 August 2010)
• HP profits up 28% on freshened servers (18 May 2010)
• HP software lands ex-Microsoft Windows and Office chief (5 May 2010)
• HP floats Q4 profit on services biz (24 November 2009)
• HP: We will grow faster than IT (25 September 2009)
• HP paddles through Q3 slump on EDS lifeboat (19 August 2009)

Tweet below the law

By JOSEPH LOH
sunday@thestar.com.my

Social networking sites such as Facebook and Twitter have allowed people to easily let others know what is on their minds. But users should be careful with what they post because the laws of the land apply to cyberspace as well.

THE Internet is increasingly becoming a virtual soapbox for people to vent their thoughts – and sometimes frustrations and dissatisfaction. The proliferation of blogs, discussion groups, and more recently, social networking, have emboldened many – with the assumption that making comments from behind a screen shields them from any legal repercussion.

However, the long arm of the law extends beyond solid ground, and reaches into the virtual realm as well.
According to H.R. Dipendra, from the Malaysian Bar Council’s human rights committee, there is no distinction between comments posted on the Internet and traditional print media.

“Internet posts are subject to similar laws as that of print media, aside from the Communications and Multimedia Act 1998 (MCMC Act) and Printing Presses and Publications Act 1984.

False sense of security: People on social networking sites and blogs tend to say more than they do in real life, thinking they can do it anonymously.

 

“You have to be careful what you write, and not just post what comes off the top of your head. If you know it to be inflammatory, then you should be careful,” he says.

Eddie Law, blogger and founder of elawyer.com.my and laweddie.com.my says that the www header is not an acronym for the wild wild west.

“Some think they can post or write anything, but that is not true,” he says.

Examples of legislation (see chart) include the Sedition Act, Internal Security Act, as well as civil and criminal defamation laws – all of which have previously been invoked to bring an individual to court, most famously in the cases involving blogger Raja Petra Kamarudin.

Dipendra

 

More recently, DAP member Teng Chang Khim was summoned to appear before the party disciplinary committee for a Twitter message that read “OMG! Real culprit freed.”

Dipendra says what has happened to Teng is fascinating, but does not believe anything will come out of it.
“His statement is not defamatory as it does not specifically refer to any particular person. It is a general opinion on a general matter,” he says.

Posting news content on Internet blogs, for example, is in some way similar to what mainstream news journalists do, but Law feels that bloggers are at a distinct disadvantage.

“They do not have proper media training or resources to help them determine what they are doing is legal.”

He opines that as social networking and blogging activity is still relatively new, there is little legal precedent to follow and there are many issues yet to be tested in court.

“The wording of the MCMC Act (Section 233 and 211) is very broad, and there is a lot of uncertainty. Because it is not yet tested, you can be snagged if its wording can be defined to suit your case,” he says.

Dipendra shares a similar opinion, and believes that when the law was drafted, it was intentionally broadly-worded.

Law

“It can be of any mode, medium or application – SMS, iPad or Twitter – so long as you type out a comment and post it, you will fall within the ambit of the two sections.

“The law is broad enough to include everyone, even an innocent disseminator,” he says.
However, he does not think it is a bad law.

“It may be uncertain and ambiguous, but not bad law. It gives enforcement agencies a lot of leeway so they would have the unfettered discretion for its use. The only question is if this discretion is used fairly,” says Dipendra.

Anonymity not guaranteed

Foong Cheng Leong, from Lee Hishammuddin Allen & Gledhill’s intellectual property department, says that people tend to say more than they do in real life, thinking they can do it anonymously.

“They think they can get away with it, but they may still get caught,” he cautions.

He gives the example of the Stemlife Bhd v Bristol-Myers Squibb (M) Sdn Bhd case. The co-defendant, Arachnid Sdn Bhd, who provided website maintenance services, was ordered to reveal the names of the persons who posted disparaging remarks against the plaintiff.

However, in a separate defamation suit involving the same parties, the judge struck out the suit against Arachnid, as it had never played an active role in respect of the content of the comments posted on the website.

There was another case where the defamatory contents of a website were deleted, but the lawyers were able to find the offending page using archived pages on waybackmachine.com.

“Simply deleting the page is not a defence, as the damage may have already been done. In a way, it is like destroying the evidence,” says Foong.

However, Law says web service providers need immunity from content posted on their website, something that United States law provides for in Section 230 of its Communi­cations Decency Act.

Foong informs that a similar “safe harbour” provision is being drawn up in Malaysia, and the same kind of immunity may later be found here.

Dipendra also says that what is posted on cyberspace stays there forever.
“Something that you said 10 years ago on a website may resurface, and you may have no recollection of even writing it.”

While existing Malaysian law appears to cover cases of wayward online behaviour at the moment, there are some who feel that there is a need for the law to be reformed.

Sonya Liew of the Bar Council explains that the world is currently undergoing both a revolution and evolution at the moment.

“Just like how there was the industrial revolution before, now we are having an information revolution,” she says.

She explains that during the agrarian age, laws were formed to protect the land, and during the industrial age, to protect intellectual property with laws regarding copyright and trademarks, for example.

“Laws regarding sedition and secrets were passed many years ago, before the information revolution. But now, society has evolved beyond this,” she says, adding that the people’s expectations regarding the right to information have evolved – together with technological advances.

“The whole world now has information at its fingertips, and if you withhold information, people start to question the lack of access to it.

“People expect information, and the question is if existing laws are sufficient to provide for the needs of a modern society,” says Liew.

She notes that signs of this can be seen in the increasing call for freedom of expression and the right to information.

“Later, we will hear of even more rights that we have not even heard of before, and it may even eat into the right to privacy,” she says, explaining that this may arise as people may want to know more about government officers’ or politicians’ lifestyle – in order to reduce graft.

“Laws exist to serve society, and society does not serve the law. We have this need now, and the question is if the Government is doing enough to provide for this need,” says Liew.

Any significant legal reform on the use of the Internet is not yet on the horizon, and until then, social networkers and bloggers should be vigilant on their online behaviour.

“People should behave the same way online as they would in real life. If they do not shout and curse in public, then their behaviour should remain the same online. They should not wear a different hat in cyberspace,” says Law.

Foong succinctly describes the appropriate online behaviour with a biblical quotation – which is still as relevant today as it was 2,000 years after it was uttered.

“Do unto others as you would have them do unto you,” quotes Foong.

Related Story:
Tweeting falsehood can cost you your job

Success in strategic speed

By ANDREW LEE
andrewlee@thestar.com.my

The early bird catches the worm” is probably one of the more popular idioms, and one that is often applied to business. It is well accepted that success in business favours the swift – companies that are able to create the most value are smarter and faster than the competition.

However, it might come as a surprise to many that despite ample resources, fancy graphs and streamlined processes in place, often the biggest problem is implementing a strategic initiative on time. Why is this the case?

President and CEO of Forum Corp, Edwin H. Boswell, has a theory. He argues that many companies focus exclusively on pace and processes, a strategy that only leads to superficial speed: lots of activity but little forward motion, short-term gain but eventual stagnation.

The more successful companies are able to achieve strategic speed – implementing strategies both quickly, and well, by shying away from fool’s gold and making the people in their company the key ingredient in their success formula.

Speaking to StarBizWeek via video link from Boston recently, he discussed the theories of his new book, Strategic Speed: Mobilize People, Accelerate Execution (Publisher: Harvard Business Press), a subject that he believes in passionately.

Boswell is one of three authors of the book. His co-authors are Jocelyn R.Davis and Henry M.Frechette, Jr.

What was the catalyst behind this book?
We started work on this book two years ago. Our company’s specialty has always been advising clients on how to execute strategies through people. And we wanted to write a book for leaders on how to get things done quickly and effectively, and the execution of those strategies.

The global financial crisis came soon after we started work on the book. This affected businesses around the world. This prompted us to dedicate a large part of the book on the speed of execution, because this unfortunate turn of events drew our attention on speed.

Can you tell us a bit about your research for this book?
We read over 500 books and articles, basically every bit of research done on execution over the past 20 years. Another important part of the work that went into this book was the survey we did with more than 350 leaders in the corporate sector, in government and those heading charity organisations around the world. We did this together with the research arm of The Economist magazine, their Economist Intelligence Unit.

We also studied 18 companies in-depth. This led to case studies on organisations such as Vodafone, Morgan Stanley and Fender Guitars. Finally, we drew on Forum Corp’s 20 years of experience managing clients to complete this book.

What were some of the key findings of your research?
There was truly a distinction between companies that executed strategies with strategic speed and those that did not. For instance, the faster companies in our sample were able to generate superior business results. On average, over a three-year period, these companies generated faster revenue growth, 40% faster than the slower ones. They made profits 50% faster as well.

What were these companies doing that made them quicker than the others?
The faster companies did not make the mistake of mistaking speed for pace. They proceeded with strategic speed and took the people factor into account. There was a high level of clarity among the people in the business about what the strategy was and the leaders made sure they took time to make sure everyone understood the company’s direction and his own individual role.

The second difference was unity. The faster companies had a stronger commitment to their strategies as well as towards working together. Lastly, these companies had a high level of agility. They had the ability to adapt to changes in the external environment, to new information in the market, as well as new opportunities or risk that came their way.

How did these companies keep their high levels of clarity, unity and agility?
That’s what most of this book is dedicated to – the leadership practices that the faster companies engaged in.
There are four main practices: the first is the affirmation of strategies. Leaders of fast companies made sure that everyone not only understands the strategy, but also buys into it.

The second is driving these initiatives. Successful leaders do not just delegate strategies, they are pretty involved in the execution of it.

Thirdly, there has to be a positive environment. This sounds cliched but if leaders are able to pay attention to the changes taking place around them,they will be able to bring out the best in their workers.

The last is cultivating experience. For example, leaders in the faster companies encourage people to step back from their day-to-day activities to share their experiences with colleagues.

The faster companies would implement these four leadership practices two to three times more frequently than the slower ones, leading to higher levels of clarity, unity and agility, which subsequently bring about strategic speed.

Will strategic speed affect quality of the final product? Is it possible to have both speed and quality?
We had a chance to interview Vodafone (one of the world’s largest mobile phone providers) chief executive officer Vitorio Collao in London recently. He did not accept the notion that speed and quality were enemies.
Vitorio wanted to create a global plan so that their clients could get the same level of service. The only problem was that Vodafone was a decentralised company, resulting in their clients receiving more invoices than they needed every month.

He knew any attempt to provide better service to his top clients would take a few years as the company was so large and complex, while team leaders would tend to proceed slowly and cautiously when executing strategies for fear of jeopardising an important plan.

Therefore, he created small teams of five or six persons and implemented a system of acountability. The team leaders would be given 12 months to execute the plan. They would also be allowed to make mistakes. He wouldn’t fire the leaders for making mistakes, he would only resort to the sack if the leaders repeated the mistakes. His belief was that smaller teams wouldn’t be as liable as bigger teams to making critical mistakes, rather, they tend to be mistakes that the company can recover and learn from.

This project was wildly succesful and Vodafone managed to generate US$3bil in incremental revenue.

Do you think culture plays a part in implementing this strategy?
One of the things we looked at is the cultural differences around strategic speed. In the West, speed is valued often just for its own sake. In other parts of the world, perhaps speed may not be as important as relationship or quality, as stated earlier.

Different cultures put different values on speed and this is a dilemma that managers have to navigate. Now that more companies around the world are becoming global, we all have to adapt to these different cultural values, even a small company like Forum due to our operations across four different continents.

I think managers all around the world are on a steep learning curve at the moment trying to identify and appreciate these different values. We do accept that there are cultural differences around speed and this will present us with new opportunities as well as challenges.