Hewlett Packard Pulls Out the Stops
Hewlett Packard Pulls Out the Stops
by Hal Plotkin
Silicon Valley Correspondent
Jul 30 1999 6:03AM ET
The selection of Carleton “Carly” Fiorina as Hewlett Packard’s new president and chief executive officer sparked a flurry of well-deserved attention last week. But the bigger buzz around Silicon Valley centers on the savvy way Hewlett Packard {HWP} prepared for her arrival.
Several leading industry watchers say last March’s decision to spin off Hewlett Packard’s test-and measurement, components, chemical analysis, and medical businesses into a separate entity, now called Agilent Technologies, has set the stage for Fiorina’s future success.
Dividing the company in two “was a very positive move,” says Steve Dube, an analyst at Wasserstein Perella in New York. “It provides a focus that will yield results.”
Formerly a widely-respected top executive at Lucent Technologies, Fiorina brings a substantial Internet-oriented track record to her new position.
Earlier this year, Hewlett Packard seemed to be floundering despite generating annual revenues of $47.1 billion dollars.
HWP 52-week price chart
Competitors like Sun Microsystems, Inc. and International Business Machines were doing a better job of winning “mind share” when it came to tapping Internet-related business opportunities.
In contrast, Hewlett Packard lumbered along, weighed down by the burden of carrying several widely divergent business lines without a clear, coherent Internet strategy. By dividing Hewlett Packard in two, those problems have been swiftly addressed.
“The company is in a rapid catch-up mode, but it is making remarkable progress,” says Dube.
Under the plan adopted by the HP Board of Directors on March 2, the company’s stockholders will hold shares in both companies.
Hewlett Packard’s new Internet-focused strategy began to take shape in earnest a few months ago with two other announcements that at the time didn’t generate much notice.
The first was the deal HP inked in March with Sunnyvale, California-based Ariba {ARBA} to launch Ariba.com. HP is providing hardware and software for the Ariba.com Network, a business-to-business Internet service that connects buyers and suppliers worldwide.
ARBA 1-month price chart
In addition to providing an online venue for Hewlett Packard to sell more equipment and services over the Internet, the Ariba.com Network is, in essence, a showcase for Hewlett Packard’s growing e-commerce prowess.
“It’s really a chance for them to prove what they can do in the Internet space,” says Daniel Kunstler, an analyst at J.P. Morgan.
One month later, Hewlett Packard made a $100 million dollar commitment to another fast-moving Silicon Valley Internet player, San Jose, California-based BEA Systems, Inc. The deal was part of a broad strategic alliance between the two companies to deploy advanced online transaction processing software.
BEAS 52-week price chart
These new alliances epitomize the more fleet-footed manner in which Hewlett Packard is now approaching the Internet market.
Rather than just look for customers, HP is working with partners using creative win-win revenue sharing agreements.
By focusing on jointly marketing e-commerce solutions, these new compensation schemes are designed to help insulate HP from falling victim to price wars over which company sells the cheapest servers or software.
“Hewlett Packard has awakened and is turning itself into an entirely different kind of company,” says Harry Fenik, vice president of Zona Research, an Internet market research firm based in Redwood City, California.
Fenik says Hewlett Packard’s “Covision” web site is another example of the deep transformation underway at the company.
The “covision” website provides an additional venue where Hewlett Packard can focus attention on its partners in a variety of different vertical markets. “They’ve gotten rid of the weights and measures stuff,” says Fenik, “and they’re pulling out all the stops. I’m very optimistic about what they are doing.”
And now, add into this mix the charismatic Fiorina, who generates fanfare not only as the first woman to lead a Fortune 100 company but, more importantly, as one of the leading architects of the online business revolution.
After helping post three straight years of record profits at Lucent, “if there is one thing Carly Fiorina has proven, it’s that she knows how to sell and market,” says Robert Wilkes, an analyst with Brown Brothers Harriman.
