Acquisitions Key to HP’s 3-Year Plan

Carly Fiorina is touting HP’s acquisition strategy –
such as its fabled merger with Compaq – as key to propelling the company to
its current status in the IT marketplace.

“We cannot say absolutely every step has been perfect, but we can say
with confidence we are where we intended to be,” Fiorina said during a
presentation to securities analysts. “We’re the clear challenger to IBM.”
Depending on market alignment, HP ranks No. 1 or No. 2.

The chairman and CEO of the Palo Alto, Calif.-based computer and printer
maker outlined the company’s blueprint to build on last year’s product and
services sales of $710 billion. The robust 3-year plan includes revamping
its server, storage, and software product lines as well as new services that
feed HP’s “Adaptive Enterprise” utility computing strategy. Fiorina said the
future would most certainly include an acquisition or two.

“We are putting together a portfolio for a specific purpose in a
different way from Dell or IBM,” Fiorina said. “The services market
continues to be fragmented and we are focused on the spaces where we made
the acquisitions. We continue to invest more in R&D and certain acquisitions
that fill in the sweet spot.”

For example, HP confirmed Tuesday that it has acquired Riverstone
Networks’ XGS technology platform and associated software licenses for $28
million. Santa Clara, Calif.-based Riverstone will retain the rights to the
operating system, but the technology is slated for products under HP’s
ProCurve Networking Business umbrella. HP said it plans to use the
technology to develop a new class of hardware it said will complement its
ProCurve Adaptive EDGE Architecture.

Fiorina’s comments come on the heels of a controversia
l report
by Merrill Lynch technology research analyst Steven Milunovich.
The outspoken strategist recommended the company realign product segments
into printers and computers or by market into consumer and enterprise. While
none of the other analysts present posed a similar challenge to HP brass,
Vyomesh Joshi, HP executive vice president Imaging and Printing, defended the division against competition.

“We sell a million printers a week, while Dell is selling 60,000,” Joshi said.

Still, Fiorina and Executive Vice President Ann Livermore said the
company’s non-printing divisions would not see a break-even financial
recovery until 2005. Most of the current losses were chalked up to
acquisitions around HP’s software management space such as TruLogica and
Novadigm. Fiorina pointed out bright spots, such as its OpenCall voice and
mobile services software.

“There is some pass through with this strategy, but this is a tremendous
value for us because it drives services and sells more of our hardware,” she

In preparation for that growth, HP said it will focus on 107 named
accounts and extending its enterprise program to some 1700 Tier I accounts.
The company is also expected to shift its sales forces overseas to Europe,
the Middle East, Africa and China. Fiorina said HP would target areas
specific areas such as network & service providers, manufacturing, finance,
public sector and small- to medium-businesses.

“I view the dot-com boom and bust as the end and the beginning. Now we
are entering the main event,” Fiorina said. “Much of the industry has been
working in a horizontal fashion. Now it is in vertical mode where we are
connecting up previous islands of technology.”

News Around the Web