Feeds

HP's Hurd faces first big test - was the Compaq buy a failure?

Answer arrives this afternoon

  • alert
  • submit to reddit

Top 5 reasons to deploy VMware with Tegile

HP CEO Mark Hurd's first chance to be the anti-Fiorina will arise this afternoon when the company reports second quarter results as the US financial markets close.

CEOs rarely relish the idea of lowering expectations or apologizing publicly for past mistakes. Hurd, however, has earned a small excuse window by being an outsider thrust to the helm of a corporate structure he did not create. This is his one chance to point out exactly where former CEO Carly Fiorina went wrong and distance himself from her actions.

The most obvious spot for Hurd to put some miles between himself and Fiorina would be by writing down the goodwill from HP's $20bn acquisition of Compaq. As stated in a recent Wall Street Journal story looking at this issue, writing down the Compaq buy would pretty much signal HP's recognition of the deal as a failure - something Fiorina was never willing to do.

"Goodwill may be an arcane accounting concept, but writing it down can be contentious," the paper stated. "Companies record goodwill on their balance sheets when they acquire another company for more than the target's tangible assets. Under accounting rules, companies must conduct an annual review to determine if their goodwill is 'impaired' - that is, if the acquired company is worth less than the acquirer paid for it. If goodwill is impaired, companies reduce, or 'write down,' the goodwill on their balance sheets and record a noncash expense on their income statements. More significant, this write-down is perceived as an acknowledgment by the purchaser that it overpaid for a company."

In the biggest context, the merger has been a failure. HP remains stuck between IBM and Dell - not quite big enough to rattle as much Global Services business as hoped and not nimble enough to match Dell's supply chain or pricing techniques. HP's share priced has languished, its business units haven't shown consistent performance and there are very serious internal conflicts still present between the aggressive Compaq staffers and more pragmatic HP veterans.

Still, however, Compaq's assets have been key to keeping HP from suffering even more during the downturn in IT spending. Compaq's old ProLiant shop has been the star of the company's server line, turning consistent profits while the pricey, higher-margin Unix gear from HP languished. In PCs, HP has remained competitive from a market share standpoint with Dell thanks, in part, to the strong Compaq brand.

It's these server and PC units that have guided HP's longtime CFO Bob Wayman on the writedown matter. Should the units remain profitable on a consistent basis then a writedown will not be necessary, according to Wayman. Hurd, of course, might see things differently and chop into the close to $14.5bn in goodwill present from the acquisition.

Another area where Hurd may chose to part ways with Fiorina is via his tone and forecasts for future quarters. Fiorina was notorious for spinning positive quarters to great heights and ignoring the real issues behind poor quarters. Hurd has an opening here to set more modest projections and be more reserved in his description of HP's prospects.

Shareholders don't tend to respond to this strategy terribly well - as Fiorina knew. So we'll see just how much room Hurd thinks he has to work with as a fresh recruit.

Many news outlets have billed Hurd as this boring, basic counter to his flashy, media star predecessor. Will Hurd live up to these dull expectations? We'll soon find out. ®

Related stories

HP can only afford 3,000 Gwen Stefani cameras
HP confirms jobs to India move
How Hilary Rosen learned to stop suing and hate Apple's iPod
HP thins UK support contract - sends hundreds of jobs to India
Fiorina regrets nothing
IBM server team calls HP 'clueless' and says Unisys's 'days are numbered'
Fiorina ready to discuss 'most successful hi-tech merger in history'

Top 5 reasons to deploy VMware with Tegile

More from The Register

next story
NSA SOURCE CODE LEAK: Information slurp tools to appear online
Now you can run your own intelligence agency
Azure TITSUP caused by INFINITE LOOP
Fat fingered geo-block kept Aussies in the dark
NASA launches new climate model at SC14
75 days of supercomputing later ...
Yahoo! blames! MONSTER! email! OUTAGE! on! CUT! CABLE! bungle!
Weekend woe for BT as telco struggles to restore service
Cloud unicorns are extinct so DiData cloud mess was YOUR fault
Applications need to be built to handle TITSUP incidents
BOFH: WHERE did this 'fax-enabled' printer UPGRADE come from?
Don't worry about that cable, it's part of the config
Stop the IoT revolution! We need to figure out packet sizes first
Researchers test 802.15.4 and find we know nuh-think! about large scale sensor network ops
SanDisk vows: We'll have a 16TB SSD WHOPPER by 2016
Flash WORM has a serious use for archived photos and videos
Astro-boffins start opening universe simulation data
Got a supercomputer? Want to simulate a universe? Here you go
prev story

Whitepapers

Designing and building an open ITOA architecture
Learn about a new IT data taxonomy defined by the four data sources of IT visibility: wire, machine, agent, and synthetic data sets.
How to determine if cloud backup is right for your servers
Two key factors, technical feasibility and TCO economics, that backup and IT operations managers should consider when assessing cloud backup.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
Reg Reader Research: SaaS based Email and Office Productivity Tools
Read this Reg reader report which provides advice and guidance for SMBs towards the use of SaaS based email and Office productivity tools.
Website security in corporate America
Find out how you rank among other IT managers testing your website's vulnerabilities.