Hurd: HP Still Does Not Cover Enough Accounts

"We just don't cover enough accounts," Hurd said in a conference call with Wall Street analysts after the company bested consensus estimates on both earnings and sales. "While we are covering more than we were, we don't cover enough. I am a strong believer that there is more demand for Hewlett-Packard in the marketplace than we are currently getting."

Overall, Hurd said it was a good start to the year with margin improvement and share gains in many of key business segments. For the quarter, HP posted Non-GAAP diluted earnings per share of 65 cents in the quarter on an 11 percent increase (7 percent with currency adjustments) in sales to $25.1 billion. The Wall Street consensus was 62 cents per share on $24.29 billion, according to a survey of analysts by Thomson First Call. HP shares closed Tuesday up 36 cents to $43.13, just off a 52 week high of $43.72. In after hours trading, HP shares were off 53 cents to $42.60.

Hurd said the opportunity to capture more share with improved account coverage in conjunction with partners is one reason the computer giant has hired a wealth of new sales talent in the past several quarters. It's also why it's critical that HP get its costs in line in each of its businesses, said Hurd. "We have to get our cost structure right," he said. "And we have to get it right as fast as we can so that we can get to the market and compete for more business."

HP's partners are hoping the new account coverage teams work hand in hand with them. Late last year though, several solution providers cried foul after HP hired away key channel sales talent.

Hurd said it takes time to hire "great people" and train them and get them "assimilated to HP" and into territories where they can go out and compete. "At the same time," he said. "We need help from our partners because they can help us close the gap by covering more accounts as well," He also praised the high attach rates being driven by partners, which helped deliver strong results, particularly in personal systems and printers."Our channel partners are doing a great job," he said "We are trying to align more around not just unit volume but attach, the ability to gain a total basket of goods inclusive of software and services."

Hurd, however, said HP and its partners can do better in the storage business where tape sales lagged and revenue grew only 3 percent. He said he wants HP storage partners to reinvest some of their margin gains back into that business to help generate higher sales.

Hurd said HP will continue to hammer on its Attach-Plus "theme" going forward. He praised the job partners did in the Personal Systems business, where HP posted an operating profit of $414 million on a 17 percent increase in sales to $8.71 billion.The personal systems group operating profit of 4.7 percent of sales was the highest in years, said Hurd, and was up from 3.9 percent in the year ago quarter.

Hurd said attach rates are important in driving more robust configurations in the personal systems segment where blade server sales were up 45 percent compared to the year ago quarter. "Attach is a very important thing for us," he said. "To be able to not just sell a unit, though those unit numbers are impressive, but if those units don't have the robust configuration about them they are not as valuable."

In the Imaging and Printing Group, HP posted an operating profit of $1.1 billion on a 7 percent increase in sales to $7.0 billion. The operating profit of 15.3 percent of sales was up from 14.9 percent in the year ago quarter.

In the enterprise storage and servers segement, HP posted an operating profit of $416 million on a 5 percent increase in sales to $4.5 billion. The operating profit of 9.3 percent of sales was up from 7.7 percent of sales in the year ago quarter.

In the software business, HP posted an operating profit of $47 million on an 81 percent increase in sales to $550 million. The operating profit of 8.5 percent of sales was up from 3 percent of sales in the year ago quarter.

In the services business, HP posted an operating profit of $414 million on a 5 percent increase in sales to $3.94 billion. The operating profit of 10.5 percent of sales was up from 7.8 percent of sales in the year ago quarter.

Hurd's praise for partner's attach efforts come after after the computer giant last May implemented its Attach Plus rebate program, a sweeping rebate formula aimed at paying partners substantially more money for attaching more HP products and services to the solutions they deliver to clients. The Attach Plus rebate program replaced a key sales volume rebate paid only to HP's Gold and Platinum partners and opened up attach rebates to all solution providers whose annual HP revenue exceeded $1 million.

HP also raised Non-GAAP estimates for the sixth consecutive quarter. HP said it now expects second quarter non-GAAP earnings per share in the range of 63 to 64 cents per share on sales of $24.5 billion. For the full year, HP said it now expects non GAAP diluted earnings per share in the range of $2.60 to $2.65 on sales of $98 billion to $99 billion.

Hurd stressed that HP still has a lot of hard work ahead to improve its operations. "We are transforming the company," he said. "We are not transformed. We need to continue to execute against our cost reduction programs, to realign our costs to invest in more marketing and field selling costs. We need to invest in great technology, and bring compelling solutions to the market that we service better than anybody else on the planet."

"The good news is we are not confused about what we need to do," said Hurd.