Mark Hurd has made eight executive hires since last June, and so far, the new faces have done wonders for the company's spirit, according to Bear Stearns analyst Andrew Neff.
"It appears that CEO Hurd is assembling an impressive team of executives from the outside in key management roles," wrote the analyst in a recent report. Examples of recent hires include former CEOs of Palm and Vignette
This is in contrast to prior leadership at HP, which were mostly internally supplied. "It corroborates our view of a renewed sense of vigor and competitive spirit at HP," Neff said. The analyst believes HP represents a turnaround story, not a growth story.
"It will need to develop growth engines as the cost story matures," Neff said. "However, investors often miss viable turnarounds as they seem too expensive for value players."
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The tech industry is undergoing "a massive wave of innovation as people start to program the Internet," H-P Chief Technology Officer Shane Robison told reporters during a briefing Friday morning. This innovation is a natural piece of HP's overall puzzle.
Going forward, Robison said, the bulk of H-P's internal R&D investments and M&A activity will focus on software and services, rather than on hardware.
"Our strategy is to build on industry standard platforms. And the way you differentiate in an industry standard world is through software," he explained, pointing to several recent software acquisitions including Peregrine Systems and AppIQ, as well as Snapfish, a popular online service for sharing and printing digital photographs.
In November, H-P's software division reported its first-ever profit, earning $27 million.
The comments come as some investors and analysts have wondered how H-P, which had roughly $86 billion in 2005 revenue, will generate a consistent and significant level of growth going forward.
According to Robison, H-P sees a big opportunity in layering services and applications onto its installed base of hardware.
"When you ship 35 million PCs a year, if we can get a $5 app on each of them, that's a big deal," he said.
The strategy is particularly well-suited towards H-P's mobile efforts, Robison said. As consumers increasingly use their notebooks and handheld computers to access new online services, H-P stands to benefit by supplying the consumer-electronics devices as well as the back-end computers and software that run the services.
The company's stock price is up 39% since Hurd began his turnaround, which to date has focused primarily on improving operational execution and cost-cutting. H-P has given pink slips to more than 15,000 workers since July, resulting in a giant $1.6 billion charge.
Robison said the company was committed to attaining the best cost structure in the industry. The goal is not simply to cut costs, he said, but to free up capital for H-P to grow through investments in internal R&D and in its sales operations.
While H-P's increasing focus on layering applicationsonto its hardware may mean it bumps up against companies like Google, Robison said that Google did not have a monopoly on innovation.
"Not all the smart people in the world work at Google," he said.
"In December, HP filed a lawsuit in a Tyler, Texas, federal court, alleging that former employees stole confidential company technology to organize a competing business venture, potentially causing HP to lose more than $100 million"
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