Feeds

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

Answer arrives this afternoon

  • alert
  • submit to reddit

Internet Security Threat Report 2014

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'

Beginner's guide to SSL certificates

More from The Register

next story
Docker's app containers are coming to Windows Server, says Microsoft
MS chases app deployment speeds already enjoyed by Linux devs
'Hmm, why CAN'T I run a water pipe through that rack of media servers?'
Leaving Las Vegas for Armenia kludging and Dubai dune bashing
'Urika': Cray unveils new 1,500-core big data crunching monster
6TB of DRAM, 38TB of SSD flash and 120TB of disk storage
Facebook slurps 'paste sites' for STOLEN passwords, sprinkles on hash and salt
Zuck's ad empire DOESN'T see details in plain text. Phew!
SDI wars: WTF is software defined infrastructure?
This time we play for ALL the marbles
Windows 10: Forget Cloudobile, put Security and Privacy First
But - dammit - It would be insane to say 'don't collect, because NSA'
Oracle hires former SAP exec for cloudy push
'We know Larry said cloud was gibberish, and insane, and idiotic, but...'
Symantec backs out of Backup Exec: Plans to can appliance in Jan
Will still provide support to existing customers
prev story

Whitepapers

Forging a new future with identity relationship management
Learn about ForgeRock's next generation IRM platform and how it is designed to empower CEOS's and enterprises to engage with consumers.
Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Win a year’s supply of chocolate
There is no techie angle to this competition so we're not going to pretend there is, but everyone loves chocolate so who cares.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
Intelligent flash storage arrays
Tegile Intelligent Storage Arrays with IntelliFlash helps IT boost storage utilization and effciency while delivering unmatched storage savings and performance.