New CEO Charts Changing Direction for HP

In her biggest speech since becoming Hewlett-Packard’s chief executive, Carly Fiorina on Monday for the first time outlined her plans to focus the company on ways to make the Internet easier to use through a combination of its hardware and software technology.

“We need to make the Internet friendlier and more useful,” Fiorina told an audience of thousands at the Comdex computer trade show in Las Vegas.

One of Fiorina’s initial goals upon joining Palo Alto-based HP from Lucent Technologies three months ago was to create a new overall brand for the company’s products, she said. To that end, she announced Monday that HP will launch a $200-million advertising campaign, dubbed “HP Invent.”

In her keynote address, Fiorina offered a preview of HP’s ad campaign and announced an unusual venture with Swatch to make watches that connect to the Internet, Dick Tracy-style.

“She addresses directly the weakness that HP had, which is talking about what they have,” said analyst Rob Enderle of Giga Information Group. “You have technology guys all over the place there, but she has a marketing background.”

Fiorina said the company’s best opportunities lie at the intersection of electronic services, computing infrastructure and appliances. “We sit right in the middle of this intersection,” she said. “We don’t look like anyone else.”

She said that going forward, the company would recognize that services are more profitable and important for the company’s growth. HP, she said, will wrap services around its current products and develop new services.

“The era of the pure products is over,” she said. “Even car sales should probably be understood as a way to sell services, such as repairs, that foster a deeper relationship with the customer.”

That’s a tough new orientation for HP, which is best known for its printers and computers.

In remarks after her speech, Fiorina said the ad campaign was not only aimed at customers and business partners but is intended to remind HP’s 87,000 employees of the sometimes-staid company’s history of innovation since its 1939 founding in Silicon Valley’s first historic garage.

Fiorina’s emphasis on telling the company’s story to the public is well-placed, Enderle said. Digital Equipment failed at that and was eventually bought by Compaq Computer. IBM CEO Lou Gerstner was late in developing a major marketing campaign but finally used one to help the company adapt to a changing market.

“The big companies didn’t [previously] realize it was important,” Enderle said. “That’s how we got companies like Dell, which came out of nowhere by making themselves known.”

Fiorina said one of her most important tasks is pepping-up HP’s famously consensus-oriented culture without killing it.

“It is culture that is going to help the Internet deliver what people want,” she said. “CEOs need to take responsibility” for balancing short- and long-term goals, speed and product quality, and profit as well as revenue.

While currently, traditional services provide just $6 billion of the company’s $40 billion in annual revenue, that will increase as the company emphasizes what it calls e-services and invests in small companies or teams with large companies to provide more of those functions, Fiorina said in an interview. “E-services is a critically important part of our strategy to accelerate growth.”

She also said there is more cost cutting ahead. For example, she cut the number of internal Web sites for employee training after discovering there were 750 of them. “We have a lot of opportunity to reduce the money we’re spending on processes and habits.”

HP stock closed down $2.06 at $74.63 on the New York Stock Exchange.