New Hewlett-Packard vice president is on the hot seat

Livermore is in charge of unit that hurt results

August 24, 2004|By Barbara Rose | Barbara Rose,CHICAGO TRIBUNE

Hewlett-Packard Co.'s Ann Livermore won a promotion in May to oversee a much bigger chunk of the computer maker's business.

Now Livermore is on the hot seat. The executive vice president's domain was expanded to include the company's troubled enterprise storage and server business, which lost $208 million in the most recent quarter.

The unit's losses dragged down results, triggering a sell-off that clipped 17 percent off HP's share price. The stock gained half of that back last week, but fell again yesterday to $17.88, which is $1.64 below where it stood the day before the company posted its latest earnings Aug. 12.

HP's poor quarterly results prompted renewed scrutiny by analysts who say the company's two-year-old merger with Compaq Computer Corp. delivered cost savings but failed to ignite sales.

"We're strong from the merger," Livermore said. "We've had very strong growth."

She mentioned businesses such as managed services, where HP takes over functions such as help-desk management for customers such as Johnson Controls Inc.

Surging 42 percent growth in managed services contributed to an overall 12 percent rise in HP's services business in the third fiscal quarter, which ended July 31.

But the Palo Alto, Calif., company got trounced by Dell Corp., whose overall sales rose nearly 20 percent in the quarter. HP's total sales rose 9 percent, weighed by a 5 percent decline in enterprise servers and storage revenues.

Martin Reynolds, vice president of Gartner Inc., a technology research firm, said HP's problems go deeper than the one-time events management blamed for poor performance.

HP attributed the unit's problems to disruption from a new order processing and supply-chain system in the United States, poor channel management in Europe and price drops because of slower-than-anticipated adoption of new storage products.

"What we're talking about here is cultural change," Reynolds said. "It's up to Livermore to fix it. [Chairman and Chief Executive Officer Carleton S.] Carly [Fiorina] needs to make it very clear that execution is absolutely critical."

Fiorina drove home her displeasure with the results by firing three sales executives including Peter Blackmore, who oversaw HP's sales to businesses. "The firings send a very clear message, but we need to see more pressure inside HP to figure out how to execute better," Reynolds said.

Livermore said last quarter's problems "should have minimal impact" in the current quarter.

"All of these things are within our control to fix," she said at an annual conference sponsored by HP users.

Livermore heads HP's Technology Solutions Group, which includes software and services as well as servers and storage. The group, with $28 billion in annual sales, is key to HP's attempt to transform itself from a hardware maker to information technology services and products provider, competing with the likes of International Business Machines Corp.

By contrast, Dell is a manufacturing and distribution juggernaut that spends comparatively little on research and development but is famous for containing costs.

Technology analyst Rob Enderle of the Enderle Group said that as the economy improves, companies are more likely to want a "solutions provider to come in and make us a more successful company as opposed to going out looking for the lowest price."

"In theory, a [technology spending] recovery should give HP an advantage, but we are still early in the recovery," he said.

The Chicago Tribune is a Tribune Publishing newspaper.

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