Hurd: Cost-cutting remains crucial for HP's growth

Cutting costs will continue to be a top priority at Hewlett-Packard for the foreseeable future, as the company aims to offer infrastructure and services to capitalize on what it sees as a US$1.2 trillion market in digital content, HP CEO and President Mark Hurd said Tuesday.
At a meeting of financial analysts in New York, Hurd said that despite efforts to reduce the amount of money HP spends on operations, products and services, the company still spends millions of dollars per hour. The good news for the company is that it has identified three major areas of cost -- business processes, products and shared services -- and "we're beginning to get under each of these cost areas," Hurd said.

"We have costs to work on, costs to get out of the company," he said. "Cost structure, excess cost, kills you in a number of dimensions."

Even as HP works to cut costs, the company also aims to grow, Hurd said. The company has been performing well in the market under the leadership of HP's top executive, who took over the company in April 2005 after the HP board dismissed beleaguered executive Carly Fiorina.

"It's important we grow, but it’s important we grow the right way," he said. Balancing the company's revenue mix between its key products segments -- software, servers, PCs and printers -- as well as its services business, is a key goal for the company, Hurd said.

"Optimizing that portfolio will be just as important to us as the revenue growth number you see from the company," he said.

Hurd said that people's growing desire to have access to as much information as possible via digital content whenever and wherever they are "creates pressure on IT infrastructure, pressure that turns into opportunity." IT trends that are growing out of this pressure, such as virtualization, server consolidation and application modernization, are all areas of disruption HP can use to sell its products and services, he said.

Still, the company faces challenges as it tries to grow. In addition to cost-cutting, another significant problem for HP is its sales coverage, as the company is currently "under-represented" in the market, Hurd said

HP added 2,000 employees to its sales efforts last year, yet the company still needs to do more, which is no easy task. "It sounds simpler than it is to hire up a sales organization," he said. "But it's probably the toughest thing we’re going to get done with our DNA."

Following Hurd's presentation, HP CFO and Executive Vice President Cathie Lesjak revealed for the first time the company's financial outlook for its 2009 fiscal year. The company expects to grow its revenue -- forecast to be in the range of $117.1 billion to $118.2 billion -- 5 percent to 6 percent year over year. Non-GAAP earnings per share for 2009 are expected to be between $3.74 to $3.84. HP is currently in the first quarter of its fiscal year 2008; 2009 begins on Nov. 1, 2008.

For 2008, HP is forecasting revenue of about $111.5 billion and EPS in the range of $3.32 to $3.37. For its fiscal year 2007 ended Oct. 31, HP reported profit of $9.6 billion on $104.3 billion revenue.