HP CEO Mark Hurd talks datacenters, networking and Palm

HP CEO Mark Hurd talks datacenters, networking and Palm

Summary: A day after Hewlett-Packard outlined plans to invest $1 billion into its enterprise services unit and cut a net 3,000 jobs, CEO Mark Hurd elaborated on the thinking behind the move, next-gen datacenters and the company's networking prospects.

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A day after Hewlett-Packard outlined plans to invest $1 billion into its enterprise services unit and cut a net 3,000 jobs, CEO Mark Hurd elaborated on the thinking behind the move, next-gen datacenters and the company's networking prospects.

Speaking at the Bank of America Merrill Lynch technology conference, Hurd said HP's services unit, which is dominated by the acquisition of EDS, is now retooling its efforts to focus on research and development of IT infrastructure as a service. HP on Tuesday talked private clouds and expanding into new services.

Hurd wants to position HP as an IT utility company that can appeal to CIOs looking to get the CEO off his back. Hurd painted the backdrop:

CEOs are leaning on CIOs hard. If you don't know, being a CIO is I think one of the toughest jobs on the planet. You are asked to be knowledgeable about the business and knowledgeable about IT simultaneously and how those two interconnect. And I think the pressure is huge to get costs down, to keep the lights on. Because CEOs want IT to be utility. I want to turn it on, I want it to work, but I also want it to cost less. At the same time, I want money to be able to go innovate. And both are problems today and I think that is not unique across banking versus a retailer, and I don't think it is unique to China versus the US. The meeting I have with a CIO in New York is, other than the accent, roughly the same that I have in Beijing.

In a nutshell, HP is trying to address that pain point whether it calls its services private cloud, Converged Infrastructure or something else. Meanwhile, HP is holding up its own streamlining internally as a proof point that it can do the same for customers.

What took so long? Hurd said HP had a lot of streamlining to do with the EDS business. Hurd said EDS just wasn't ready to innovate. He said:

Let me try to give you some history on Enterprise Services, just so you know how complicated it was. When we bought these guys, revenue was $23 billion. So $23 billion in revenue, $22 billion in cost. They made $1 billion. That $22 billion was in 300,000 call centers. So imagine you came to the company, you got a cell phone, you got a PC and you got three call centers. Every employee was in -- had three separate call centers. So think of this as the natural cost of the business was $33 billion, $34 billion; so about $11 billion, $12 billion was eliminated at the corporate level through these 300,000 accounts. So complexity with a capital C. At the same time, the sales force was tiny. So here was a group growing 1%, couldn't afford to expand its sales force, and frankly, carried a lot of cost with it.

Now that HP has made EDS more efficient, Hurd reckons he can do things "with R&D that we wanted to do from the beginning, but had to get the business to this state." So now HP will consolidate its data centers for its services unit, standardize and automate, said Hurd. The effort will save money, but also give HP a more efficient platform to grow.

Among other hot topics with HP and Hurd:

HP's networking strategy. Hurd was bullish on HP's networking prospects and its lineup of ProCurve, 3Com and the software that goes with it. Networking is a cog that HP will use to sell an IT stack. Hurd said it wants to be No. 1 in servers, No. 2 in storage and No. 2 in networking. From there, HP can "mix and match based on the job at hand." HP is planning to take share from Cisco in networking too. Hurd said that at the end of the last quarter, HP landed two Fortune 50 deals for data center products. We are in a material number of proof of concepts today, and I would expect that we would have more announcements shortly. The Palm acquisition had nothing to do with being in the smartphone business. Hurd said that the company isn't going to "spend billions of dollars trying to go into the smartphone business; that doesn't in any way make any sense." Hurd added:

We didn't buy Palm to be in the smartphone business. And I tell people that, but it doesn't seem to resonate well. We bought it for the IP. The WebOS is one of the two ground-up pieces of software that is built as a web operating environment...We have tens of millions of HP small form factor web-connected devices...Now imagine that being a web-connected environment where now you can get a common look and feel and a common set of services laid against that environment. That is a very value proposition.

Related:

Update:

On Thursday, HP sought to clarify Hurd's comments, which weren't materially different than what he said on the company's earnings conference call. A spokeswoman said:

When we look at the market, we see an array of interconnected devices, including tablets, printers, and of course, smartphones. We believe WebOS can become the backbone for many of HP's small form factor devices, and we expect to expand webOS’s footprint beyond just the smartphone market, all while leveraging our financial strength, scale, and global reach to grow in smartphones.

Topics: Data Centers, CXO, Hardware, Hewlett-Packard, Mobility, Networking, Operating Systems, Storage

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34 comments
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  • HP is not just cutting jobs

    The ones that are cut are all in the US, the ones that are hired are all in India, the Philippines, and China. So it is still a net loss of job into the upper thousands, not just 3000.

    Automation in data centers is good, we have saved some money by using tools more effectively in our data center. But outsourcing companies like HP and Accenture are cutting into the bone, because the support for users is taking a hit. Where will it end up?
    terry flores
    • <a href="http://www.tran33m.com/vb/f82.html">iphone</a>

      @terry flores Just because HP won't sell smartphones doesn't mean the Pre is going to die. HP will likely license WebOS for phone use to various manufacturers like Motorola, Nokia, and HTC.
      frankts
      • <a href="http://www.tran33m.com/vb/f81.html">blackberry</a>

        @frankts I waiting to see what hp's next move will be, and bad move could cause the organization to loose alot of money: oh.. and i agree with the restructuring and everything else your doing:)
        frankts
      • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

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    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @terry flores If you think from the company?s point of view, outsourcing actually will create more quality jobs in the home grown than not. Take Apple for example. They outsource their customer support but use local couriers to deliver their products. Their retail stores are staffed by locals in the most central locations. Customer support is very much a time consuming process by itself, and I am not sure if automating a data centre can fully resolve that problem, but it is still a viable solution in the long run. If you think outsourcing is taking jobs away, perhaps you are seeking employment in the wrong places.

      Paul
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    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @terry flores lot higher likelihood that with their search results tied to phone access that they are coming closer
      to the line. Many media outlets have been pared down as well as the phone companies. The day is coming,
      and google may have to spin off something to
      stay within bounds of the law. Lets hope it's the search engine, or everything else.
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    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @terry flores Automation in data centers is good, we have saved some money by using tools more effectively in our data center. But outsourcing companies like HP and Accenture are cutting into the bone, because the support for users is taking a hit. Where will it end


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    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

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  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    If HP doesn't make a major play into the smartphone market that's going to be a huge disappointment.
    vara411
    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @vara411 - explain. you must have more of an opinion that "huge dissappointment."
      robb.macomber@...
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    I usually stayed away from hp products. I love my Palm pre and was thinking of trying an hp product. If hp does not come out with a new palm device with web os, I guess I will have to move on to an android phone, and no web os tablet for me then.
    pmjj
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    It's possibly one of the most terrible decisions I think I've heard in a long time. Not using what most people know as the most fluent, user friendly and well respected smart phone UI's to sell smart phones is like cutting off your nose to spite your face. They don't need to spend billions of dollars entering the smart-phone market, they JUST spent 1.2 Billion on a company that is already IN the smart phone market in a big way!! What is the downside of allowing Palm to work autonimously as the smart phone division while HP leverages WebOS on other products and then makes them interactive. Can you imagin how well they would do if they could take every office that had HP Printers and sold enterprise smartphone solutions with WebOS that could manipulate documents and print them directly from the phone. The two would become inherent like selling cereal and milk. One would very naturally leverage off the other and cause sales to happen. It's a no brainer.
    Thor e
    • Palm Smartphone....

      @Thor e : I think the problem is that Palm was hemorrhaging and seriously in the red. WebOS is a great OS but does HP really want to fight that battle?
      ryork272
    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @Private420
      Private420
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    1: hp gains all palms customer base:
    2: If hp doesn't try to enter the smart phone business the company will lose all palms customer base to Google:
    3: Most of hp's customers feels the company is going in the right direction: buying palm. Most customers want to use their smart phones with their other hp devices:
    4: Every one in the world has a smart phone: if hp does not try to get in the smart phone business, (especially when most of the carriers have the palm devices) then what was the point of buying palm in the first place.
    5: Hp does not know if web os will go over well with their customer base: using web os in other devices:
    6: I believe CEO Mark Hurd has an i-phone and does not believe in palms web os, by the way i have had three laptops from hp but kept having issues that the best buy team could not explain:
    The whole point of this e-mail: a least try to enter the smart phone business and keep palms legacy going:
    I waiting to see what hp's next move will be, and bad move could cause the organization to loose alot of money: oh.. and i agree with the restructuring and everything else your doing:)
    Just waiting to go into to best buy to see improved hardware: laptops, tvs, etc....you guys are going to have to take some risk if you plan to keep making it in this economy:)
    the first Smart Guy
    • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

      @the first Smart Guy...
      Private420
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    Thor e and Smart guy i couldn't have said it better myself. Who is this idiot ... do you not know that web OS will dominate all if you will only let palm just do its own thing within HP. I can't beleive this crap!! Well if your gonna basically kill web OS and palm from a smart phone perspective atleast we all have front row seats to watch your ass eventually get fired for losing millions of dollars along with all the consumers to android. Thanks alot HP... AND TURD U PROLLY ARE AN APPLE FAN BOY!
    The Nfamous One
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    Am I missing the point here ? Hurd doesnt say there will be no more palm webOS smartphones, just that the reason for buying Palm was the webOS. I can't wait for the phone/pad/printer/webcam/router/PC and whatever else HP are currently producing - all running the same OS, same look-and-feel and all working seamlessly - that's where HP will beat the likes of MS/Apple in the homes AND in the offices. Here's hoping that's his strategy.
    JustJak
  • RE: HP CEO Mark Hurd talks datacenters, networking and Palm

    This sounds too stupid to be true. They bought a great smartphone OS "not to enter the smartphone business" ? Huh?

    Someone should ask HP to clarify this decision. Will HP make smartphones based on WebOS, yes or no?
    Garion DK