Hewlett-Packard 2008

Forest David: Francis Marion University

A.

Case Abstract
Hewlett-Packard (www.hp.com) is a comprehensive business policy and strategic management case that includes the companys fiscal year-end October 2007 financial statements, competitor information and more. The case time setting is the year 2008. Sufficient internal and external data are provided to enable students to evaluate current strategies and recommend a three-year strategic plan for the company. Headquartered in Palo Alto, California, Hewlett-Packards common stock is publicly-traded on the New York Stock Exchange under the ticker symbol HPQ. Hewlett-Packard operates in five segments: Enterprise Storage and Servers, Services, Software, Personal Systems, Imagining and Printing, and Financial Services. The company has over 170,000 employees and is led by CEO Mark Hurd whose base pay was $14 million in 2007. The firms major competitors include Dell, IBM, Canon, Texas Instruments, and Apple.

B.

Vision Statement (proposed)

To become recognized as the number one computer company in the world.

C.

Mission Statement (proposed)

Hewlett-Packard is committed to being the best technology solutions provider to consumers, businesses and institutions globally by providing superior products and services for businesses and personal consumers (1,2). Our emphasis is based on domestic and global markets (3). We provide information technology systems to serve our customers more efficiently (4). We are dedicated to quality and consistency to maintain and gain customer loyalty (6). We are dedicated to growth and profitability (5) by treating employees (9) in ways that create extraordinary products for our customers, and that create high shareholder value, while maintaining a valued name throughout the computer and technology industry (8). Hewlett-Packard is synonymous with quality products and high customer satisfaction in every product and service that we provide (7). 1. 2. 3. 4. Customer Products or services Markets Technology
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5. 6. 7. 8. 9.

Concern for survival, profitability, growth Philosophy Self-concept Concern for public image Concern for employees

D.

External Audit
Opportunities 1. The worldwide personal computer industry posted its fourth consecutive year of double digit expansion in 2006, recording 10 percent unit growth. 2. PC shipments in the Asia-Pacific region expanded by an estimated 17.6 percent in 2006 on a unit basis. 3. IDCs rest of the world category, which includes Eastern Europe, Latin America, and the Middle East rose 22 percent on a preliminary basis. 4. It is estimated that the PC industry will post total unit growth of approximately 11 percent for 2007. 5. Dells units sold declined 8.4 percent, so Dells market share fell by nearly 300 basis points on a year-over-year basis. 6. Over the past three years, Gateways gross margins narrowed from 14.4 percent in the first quarter of 2004 to 5.2 percent in the fourth quarter of 2006 7. During the fourth quarter of 2006, server market revenue grew by 5.2 percent. 8. Dell achieved server market share of 9.4 percent on server revenue growth of 2.4 percent, down from 9.6 percent 9. Worldwide revenues for servers were up 2.0 percent to $52.3 billion. 10. In the first quarter of 2006, IBMs server revenue growth of 3.8 percent put its market share at 37.9 percent, down from 38.4 percent the comparable year-earlier quarter. Threats 1. IBM maintained its position as the leader in overall server market revenues in 2006. 2. PC unit shipments in the U.S. declined 0.5 percent in the fourth quarter of 2006. 3. During the fourth quarter of 2006, Apple grew its units by 31.8 percent in the U.S. market. 4. Suns server market share was 9.7 percent in the fourth quarter of 2006, up from 8.2 percent a year earlier. 5. Apples switch in 2006 to Intel-based chips increased the processing power of Macs. 6. IBMs server factory revenues increased 0.8 percent. 7. Sun Microsystemss server factory revenues increased 11.2 percent. 8. Apples improvement in the U.S. market share from 3.3 percent in 2004 to 4.0 percent in 2005, and then to 4.2 percent in 2006. 9. IBMs high-end sever market share rose to 57.2 percent from 53.6 percent as revenues improved by 6.6 percent. 10. Sun Microsystemss low-end server market share expanded 60 basis points to 8.2 percent.

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CPM Competitive Profile Matrix

Critical Success Factors Market Share Price Financial Position Product Quality Product Lines Consumer Loyalty Employees TOTAL Weight 0.20 0.10 0.20 0.15 0.10 0.20 0.05 1.00 Hewlett-Packard Rating Weighted Score 3 0.60 3 0.30 3 0.60 3 0.45 4 0.40 3 0.60 4 0.20 3.15 Dell Rating Weighted Score 2 0.40 3 0.30 3 0.60 3 0.45 2 0.20 2 0.40 2 0.10 2.45 Rating 3 2 4 4 4 3 4 IBM Weighted Score 0.60 0.20 0.80 0.60 0.40 0.60 0.20 3.40

External Factor Evaluation (EFE) Matrix

Key External Factors Opportunities 1. The worldwide personal computer industry posted its fourth consecutive year of double digit expansion in 2006, recording 10 percent unit growth. 2. PC shipments in the Asia-Pacific region expanded by an estimated 17.6 percent in 2006 on a unit basis. 3. IDCs rest of the world category, which includes Eastern Europe, Latin America, and the Middle East rose 22 percent on a preliminary basis. 4. It is estimated that the PC industry will post total unit growth of approximately 11 percent for 2007. 5. Dells units sold declined 8.4 percent, so Dells market share fell by nearly 300 basis points on a year-over-year basis. 6. Over the past three years, Gateways gross margins narrowed from 14.4 percent in the first quarter of 2004 to 5.2 percent in the fourth quarter of 2006 7. During the fourth quarter of 2006, server market revenue grew by 5.2 percent. 8. Dell achieved server market share of 9.4 percent on server revenue growth of 2.4 percent, down from 9.6 percent 9. Worldwide revenues for servers were up 2.0 percent to $52.3 billion. 10. In the first quarter of 2006, IBMs server revenue growth of 3.8 percent put its market share at 37.9 percent, down from 38.4 percent the comparable year-earlier quarter. Weight Rating Weighted Score

0.07

0.28

0.06 0.05

3 2

0.18 0.10

0.08 0.07 0.07 0.06 0.04 0.05 0.05

4 3 3 3 2 2 2

0.32 0.21 0.21 0.18 0.08 0.10 0.10

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Threats 1. IBM maintained its position as the leader in overall server market revenues in 2006. 2. PC unit shipments in the U.S. declined 0.5 percent in the fourth quarter of 2006. 3. During the fourth quarter of 2006, Apple grew its units by 31.8 percent in the U.S. market. 4. Suns server market share was 9.7 percent in the fourth quarter of 2006, up from 8.2 percent a year earlier. 5. Apples switch in 2006 to Intel-based chips increased the processing power of Macs. 6. IBMs server factory revenues increased 0.8 percent. 7. Sun Microsystemss server factory revenues increased 11.2 percent. 8. Apples improvement in the U.S. market share from 3.3 percent in 2004 to 4.0 percent in 2005, and then to 4.2 percent in 2006. 9. IBMs high-end sever market share rose to 57.2 percent from 53.6 percent as revenues improved by 6.6 percent. 10. Sun Microsystemss low-end server market share expanded 60 basis points to 8.2 percent. TOTAL

0.09 0.01 0.05

1 2 2

0.09 0.02 0.10

0.04 0.02 0.02 0.03 0.03 0.07 0.04 1.00

2 2 2 2 3 2 2

0.08 0.04 0.04 0.06 0.09 0.14 0.08 2.50

E.

Internal Audit
Strengths HPs unit growth was an impressive 23.8 percent, significantly outpacing the second and third-place vendors 2. In November 2006, HP completed the acquisition of Mercury Interactive Corp., a provider of software and services, for $4.5 billion. 3. HPs net property, plant, and equipment increased from $6.5 billion in 2005 to $6.9 billion in 2006. 4. HPs worldwide PC shipments market share increased in 2006 to 17 percent from 15.7 percent in 2005. 5. HP experienced a 8.4 percent increase in worldwide volume server market share. 6. HPs high-end server revenues increased 2.4 percent. 7. HP remained in the number 1 spot in the fourth quarter of 2006, according to IDC, and gained more than 200 basis points of market share on a year-over-year basis, ending the period at 18.1 percent. 8. In the U.S., HPs market share rose to 24.0 percent from 20.6 percent. 9. HPs server revenue growth was 5.1 percent in the fourth quarter of 2006. 10. HPs non-U.S. net revenue rose from $56.1 billion in 2005 to 59.4 billion in 2006.
1.

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Weaknesses
1. 2.

3.
4.

5. 6.
7. 8.

9.
10.

HPs worldwide midrange server market share decreased 21.3 percent in 2006. HP ceded 100 basis points of server market share, to 26.8 percent. Local labor conditions and regulations HPs return on equity is 18.55 percent, while the return in equity of the industry leader in return on equity is 38.93 percent. Managing a geographically dispersed workforce HPs long-term debt/equity is 0.233, while the long-term debt/equity of the industry leader in long-term debt/equity is 1.689. HPs server vendor market share dropped from 26.9 percent in 2005 to 26.8 percent in 2006. Over 60 percent of overall net revenue in 2006 came from outside of the U.S. Longer accounts receivable cycles HPs long-term growth rate (5 yrs) is 13.82 percent, while the long-term growth rate of the industry leader in long-term growth is 22.62 percent.

Financial Ratio Analysis (October 2007)

Growth Rates % Sales (Qtr vs year ago qtr) Net Income (YTD vs YTD) Net Income (Qtr vs year ago qtr) Sales (5-Year Annual Avg.) Net Income (5-Year Annual Avg.) Dividends (5-Year Annual Avg.) Price Ratios Current P/E Ratio P/E Ratio 5-Year High P/E Ratio 5-Year Low Price/Sales Ratio Price/Book Value Price/Cash Flow Ratio Profit Margins Gross Margin Pre-Tax Margin Net Profit Margin 5Yr Gross Margin (5-Year Avg.) 5Yr PreTax Margin (5-Year Avg.) 5Yr Net Profit Margin (5-Year Avg.) Financial Condition Debt/Equity Ratio Current Ratio Quick Ratio Interest Coverage Leverage Ratio Book Value/Share Investment Returns % Hewlett-Packard 15.20 17.20 27.50 13.01 NA 0.00 16.2 NA NA 1.06 2.91 11.10 24.4 8.8 7.0 24.4 6.2 5.0 0.21 1.2 1.0 NA 2.3 14.93 Industry 11.70 29.80 22.60 7.63 7.68 10.98 15.7 2.9 1.5 1.29 4.08 5.00 35.2 11.8 8.8 33.6 9.3 6.6 0.77 1.2 1.1 11.6 3.3 17.50 SP-500 12.10 16.40 12.00 13.12 20.25 9.94 20.4 23.8 6.1 2.37 3.39 10.60 34.1 17.8 12.6 34.3 16.4 11.4 1.14 1.1 0.8 42.3 4.0 19.13

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Return On Equity Return On Assets Return On Capital Return On Equity (5-Year Avg.) Return On Assets (5-Year Avg.) Return On Capital (5-Year Avg.) Management Efficiency Income/Employee Revenue/Employee Receivable Turnover Inventory Turnover Asset Turnover Adapted from www.moneycentral.msn.com Date 10/07 10/06 10/05 10/04 10/03 Avg. P/E 16.50 15.00 27.80 18.30 22.90

19.0 8.5 15.2 11.6 5.6 9.3 42,233 606,314 7.1 10.0 1.2

27.8 8.7 14.7 19.5 6.2 10.0 18,434 268,908 4.9 4.7 1.0 Price/Book 3.46 2.77 2.14 1.45 1.80 ROE (%) 18.9 16.2 6.5 9.3 6.7

24.6 7.4 9.9 18.3 6.2 8.3 90,463 800,790 14.1 7.6 0.8 Net Profit Margin (%) 7.0 6.8 2.8 4.4 3.5

Price/Sales 1.35 1.21 0.94 0.71 0.94

Date Book Value/ Share Debt/Equity 10/07 $14.93 0.21 10/06 $13.96 0.14 10/05 $13.10 0.14 10/04 $12.90 0.19 10/03 $12.40 0.20 Adapted from www.moneycentral.msn.com

ROA (%) 8.2 7.6 3.1 4.6 3.4

Interest Coverage 16.4 19.5 10.1 16.8 10.5

Net Worth Analysis (October 2007 in millions)

1. Stockholders Equity + Goodwill = 38,500 + 21,700 2. Net income x 5 = $7,200 x 5= 3. Share price = $43.00/EPS 2.68 =$16.04 x Net Income $7,200= 4. Number of Shares Outstanding x Share Price = 2,550 x $43.00 = Method Average $ 60,200 $ 36,000 $ 115,500 $ 109,650 $80,337

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Strengths 1. HPs unit growth was an impressive 23.8 percent, significantly outpacing the second and thirdplace vendors 2. In November 2006, HP completed the acquisition of Mercury Interactive Corp., a provider of software and services, for $4.5 billion. 3. HPs net property, plant, and equipment increased from $6.5 billion in 2005 to $6.9 billion in 2006. 4. HPs worldwide PC shipments market share increased in 2006 to 17 percent from 15.7 percent in Weight Rating Weighted Score

0.07 0.08 0.04 0.08

4 4 3 4

0.28 0.32 0.12 0.32

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2005. 5. HP experienced a 8.4 percent increase in worldwide volume server market share. 6. HPs high-end server revenues increased 2.4 percent. 7. HP remained in the number 1 spot in the fourth quarter of 2006, according to IDC, and gained more than 200 basis points of market share on a year-over-year basis, ending the period at 18.1 percent. 8. In the U.S., HPs market share rose to 24.0 percent from 20.6 percent. 9. HPs server revenue growth was 5.1 percent in the fourth quarter of 2006. 10. HPs non-U.S. net revenue rose from $56.1 billion in 2005 to 59.4 billion in 2006. Weaknesses 1. HPs worldwide midrange server market share decreased 21.3 percent in 2006. 2. HP ceded 100 basis points of server market share, to 26.8 percent. 3. Local labor conditions and regulations 4. HPs return on equity is 18.55 percent, while the return in equity of the industry leader in return on equity is 38.93 percent. 5. Managing a geographically dispersed workforce 6. HPs long-term debt/equity is 0.233, while the long-term debt/equity of the industry leader in long-term debt/equity is 1.689. 7. HPs server vendor market share dropped from 26.9 percent in 2005 to 26.8 percent in 2006. 8. Over 60 percent of overall net revenue in 2006 came from outside of the U.S. 9. Longer accounts receivable cycles 10. HPs long-term growth rate (5 yrs) is 13.82 percent, while the long-term growth rate of the industry leader in long-term growth is 22.62 percent. TOTAL

0.07 0.04 0.03 0.05 0.06 0.06 0.09 0.06 0.01 0.06 0.01 0.03 0.01 0.08 0.02 0.05 1.00

3 3 3 4 3 4 1 2 2 1 2 1 1 1 2 1

0.21 0.12 0.09 0.20 0.18 0.24 0.09 0.12 0.02 0.06 0.02 0.03 0.01 0.08 0.02 0.05 2.58

F.

SWOT Strategies
SO Strategies 1. Focus advertising of the Blackbird gaming PC in the Asia-Pacific region (S4, S10, O1, O2, O4). 2. Increase advertising by $200 million in Eastern Europe and Latin America (S4, S10, O1, O3, O4). WO Strategies

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1. Design and introduce a competitive and highly functional midrange server (W1, O9). 2. Offer $500 million in rebates to businesses for purchasing and using HP products.

ST Strategies 1. Allocate $200 million extra for advertising budget in the in the US (S8, T2). 2. Offer $200 million in rebates to customers to give further incentives to buy HP computers (S3, S8, T2). WT Strategies Open 50 new HP stores in major metropolitan areas (W8, T2). 2. Develop an high-end server to increase serve market share and compete with IBM (W2, T1, T6, T9).
1.

G.

SPACE Matrix

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Co

x-axis: -2.2 + 5.6 = 3.4 y-axis: 5.6 + -3.8 = 1.8 Coordinate: (3.4, 1.8)

H.

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Financial Strength Return on Assets (R Competitive Advan Leverage Market Share Net Income Product Quality Income/Employee Customer Loyalty
Grand Strategy Matrix
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I.

The Internal-External (IE) Matrix

The IFE Total Weighted Score Strong 3.0 to 4.0 I Average 2.0 to 2.99 II Weak 1.0 to 1.99 III

High 3.0 to 3.99

Medium

IV

VI

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The EFE Total 2.0 to 2.99 Weighted Score

Hewlett- Packard

Low 1.0 to 1.99

VII

VIII

IX

Hold and Maintain

Product Segment Personal Systems Imagining & Printing Enterprise Storage Servers Financial Services Software Percent Revenue 49 29 19 2 1

J.

QSPM
Increase advertising budget worldwide AS TAS 2 2 2 4 0.14 0.16 0.08 0.32 Open 50 HP stores in US AS TAS 1 1 3 2 0.07 0.08 0.12 0.16

Strategic Alternatives Key Internal Factors Strengths 1. HPs unit growth was an impressive 23.8 percent, significantly outpacing the second and third-place vendors 2. In November 2006, HP completed the acquisition of Mercury Interactive Corp., a provider of software and services, for $4.5 billion. 3. HPs net property, plant, and equipment increased from $6.5 billion in 2005 to $6.9 billion in 2006. 4. HPs worldwide PC shipments market share increased in 2006 to 17 percent from 15.7 percent in 2005. Weight

0.07 0.08 0.04 0.08

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5.

HP experienced a 8.4 percent increase in worldwide volume server market share. 6. HPs high-end server revenues increased 2.4 percent. 7. HP remained in the number 1 spot in the fourth quarter of 2006, according to IDC, and gained more than 200 basis points of market share on a year-over-year basis, ending the period at 18.1 percent. 8. In the U.S., HPs market share rose to 24.0 percent from 20.6 percent. 9. HPs server revenue growth was 5.1 percent in the fourth quarter of 2006. 10. HPs non-U.S. net revenue rose from $56.1 billion in 2005 to 59.4 billion in 2006. Weaknesses 1. HPs worldwide midrange server market share decreased 21.3 percent in 2006. 2. HP ceded 100 basis points of server market share, to 26.8 percent. 3. Local labor conditions and regulations 4. HPs return on equity is 18.55 percent, while the return in equity of the industry leader in return on equity is 38.93 percent. 5. Managing a geographically dispersed workforce 6. HPs long-term debt/equity is 0.233, while the long-term debt/equity of the industry leader in long-term debt/equity is 1.689. 7. HPs server vendor market share dropped from 26.9 percent in 2005 to 26.8 percent in 2006. 8. Over 60 percent of overall net revenue in 2006 came from outside of the U.S. 9. Longer accounts receivable cycles 10. HPs long-term growth rate (5 yrs) is 13.82 percent, while the long-term growth rate of the industry leader in long-term growth is 22.62 percent. SUBTOTAL

0.07 0.04 0.03

4 -----

0.28 -----

2 -----

0.14 -----

0.05 0.06 0.06 0.09 0.06 0.01 0.06 0.01 0.03 0.01 0.08 0.02 0.05 1.00

2 --3 3 3 ------2 --4 -----

0.10 --0.18 0.27 0.18 ------0.06 --0.32 ----2.09

3 --1 1 1 ------4 --1 -----

0.15 --0.06 0.09 0.06 ------0.12 --0.08 ----1.13

Key External Factors Opportunities 1. The worldwide personal computer industry posted its fourth consecutive year of double digit expansion in 2006, recording 10 percent unit growth. 2. PC shipments in the Asia-Pacific region expanded by an estimated 17.6 percent in 2006 on a unit basis. 3. IDCs rest of the world category, which includes Eastern Europe, Latin America, and the Middle East rose 22 percent on a preliminary basis. 4. It is estimated that the PC industry will post total unit growth of approximately 11 percent for 2007.

Weight

Increase advertising budget worldwide AS TAS 4 4 0.28 0.24

Open 50 HP stores in US AS TAS 2 1 0.14 0.06

0.07 0.06

0.05 0.08

4 2

0.20 0.16

1 4

0.05 0.32

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5. Dells units sold declined 8.4 percent, so Dells market share fell by nearly 300 basis points on a year-over-year basis. 6. Over the past three years, Gateways gross margins narrowed from 14.4 percent in the first quarter of 2004 to 5.2 percent in the fourth quarter of 2006 7. During the fourth quarter of 2006, server market revenue grew by 5.2 percent. 8. Dell achieved server market share of 9.4 percent on server revenue growth of 2.4 percent, down from 9.6 percent 9. Worldwide revenues for servers were up 2.0 percent to $52.3 billion. 10. In the first quarter of 2006, IBMs server revenue growth of 3.8 percent put its market share at 37.9 percent, down from 38.4 percent the comparable year-earlier quarter. Threats 1. IBM maintained its position as the leader in overall server market revenues in 2006. 2. PC unit shipments in the U.S. declined 0.5 percent in the fourth quarter of 2006. 3. During the fourth quarter of 2006, Apple grew its units by 31.8 percent in the U.S. market. 4. Suns server market share was 9.7 percent in the fourth quarter of 2006, up from 8.2 percent a year earlier. 5. Apples switch in 2006 to Intel-based chips increased the processing power of Macs. 6. IBMs server factory revenues increased 0.8 percent. 7. Sun Microsystemss server factory revenues increased 11.2 percent. 8. Apples improvement in the U.S. market share from 3.3 percent in 2004 to 4.0 percent in 2005, and then to 4.2 percent in 2006. 9. IBMs high-end sever market share rose to 57.2 percent from 53.6 percent as revenues improved by 6.6 percent. 10. Sun Microsystemss low-end server market share expanded 60 basis points to 8.2 percent. SUBTOTAL SUM TOTAL ATTRACTIVENESS SCORE

0.07 0.07 0.06 0.04 0.05 0.05

--------4 ---

--------0.20 ---

--------1 ---

--------0.05 ---

0.09 0.01 0.05 0.04 0.02 0.02 0.03 0.03 0.07

2 2 ---------------

0.18 0.02 ---------------

3 4 ---------------

0.27 0.04 -------------

0.04

---

--1.28 3.37

---

--0.93 2.06

K.

Recommendations
The QSPM strategies assessed whether increasing the advertising budget by $400 million or opening 50 Hewlett Packard stores was the better alternative. The QSPM revealed increasing advertising to focus on current markets was the most effective strategy. However, it is still feasible to suggest opening 50 new HP stores at an initial cost of $250 million.

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L.

EPS/EBIT Analysis
$ Amount Needed: 650M Stock Price: $43 Tax Rate: 35% Interest Rate: 5% # Shares Outstanding: 2,550M

M.

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EBIT Interest EBIT EBT Interest Taxes EBT EAT

Epilogue

On January 31, 2008, HP unveiled at the Photo Marketing Association (PMA) tradeshow several retail photo printing solutions and services that provide consumers with tools to personalize their photos and publish customized creative output. With three major analog-to-digital conversion processes already underway in film, telephony and TV and as more analog processes such as book publishing are converted to digital, the growth of digital content is exploding. According to industry analyst firm IDC, the information added annually to the digital universe is expected to increase more than 600% from 161 billion gigabytes to 988 billion gigabytes between 2006 and 2010. In 2006 alone, the amount of digital information created, captured and replicated was

Rec 2,000 Rec 2,000 2,000 9,7 700, 1,990 1,300

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approximately 3 million times the information in all the books ever written. This is a major opportunity for HP. Put simply, we want our customers to be able to bring rich content to life, said David Murphy, senior vice president, Web Services and Software Business, HP. In combining our printing franchise with a world-class set of software and web assets, HP is creating a multibillion-dollar business poised to lead the transformation to a comprehensive digital supply chain from content creation and management to publishing and consumption. Nowhere is the disconnect between digital content creation and publishing more prevalent than in the digital photography market, where the difference between the number of images captured and those that are actually published or printed is vast and growing. To bridge this gap, HP now offers the new HP Photo Center to personalize their photos and publish customized creative content. In the retail photo environment, the company is working to transform retailers traditional photo labs into digital publishing centers that move beyond prints to rich digital media, such as photo books, posters, calendars and other creative photo products. HP also just began offering its Snapfish by HP members the ability to order posters online to be picked up the same day at any of Staples 1,400 Copy and Printer Centers nationwide. Staples is the first nationwide retailer to offer this service. Starting at $14.99, (3) the posters will be printed in-store on HP Designjet printers and offered in two sizes 16 x 20 inches and 20 x 30 inches. Customers will have the choice of using a single image or creating a collage of up to 30 images, and they can add a title as well as select from up to 14 background colors. Between 2004 and 2007, the web-to-retail market in the United States grew more than 1,200 percent to more than 1.2 billion prints, according to internal HP data. In 2007, the Snapfish network of online photo sites generated more than 1 billion of those 1.2 billion web-to-store prints. For doing a fantastic job, Hewlett-Packard Co. CEO Mark Hurd received compensation of $26 million for the 2007 fiscal year, reflecting the board's satisfaction with HP's aggressive sales growth and cost-cutting moves. Hurd, 51, took home $1.4 million in base salary, another $1.4 million in bonus money and nearly $12 million in cash incentive payouts. In addition, Hurd made $4.8 million on stock options he exercised, and he had $7.4 million worth of HP stock vested during the latest period. The document noted that the pay for Hurd and other executives was increased because the company beat its financial targets in all business segments in 2007, despite aggressive goals set by the board after an especially prosperous period the year before. In nearly three years as CEO, Hurd has guided HP to a number of significant milestones, including recapturing the title of world's biggest PC seller from rival Dell Inc. and cracking $100 billion in annual sales for the first time. HP Profits have more than tripled under Hurd's leadership, rising to $7.26 billion in fiscal 2007. HP has cut costs by consolidating data centers and corporate offices and aggressively slashed nearly 15,000 jobs in a massive restructuring launched shortly after Hurd's arrival as CEO and completed in October 2007. Some 3,000 more employees left the company as part of an early retirement program that HP initiated last year. Since Hurd took the reins of HP in April 2005, the company's stock price has more than doubled, from around $20 to more than $40 today, a rise that has created more than $50 billion in additional shareholder wealth.
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In addition, in early 2008, HP unveiled two new energy-efficient business desktop PCs. The HP Compaq dc7800 Ultra-slim Desktop PC, with solid-state hard drive for improved reliability, and the Compaq dc5800 Business PC include a variety of environmentallyfriendly features that allow them to qualify for the Electronic Product Environmental Assessment Tool (EPEAT) Gold registry. The EPEAT registry helps businesses evaluate and select technology products based on their environmental attributes. Priced at $1258, the dc7800 Ultra-slim Desktop PC's solid-state hard drive provides near instantaneous access to data and eliminates moving parts, which are the main cause of electromechanical wear. It also offers a faster system start, better reliability, improved power efficiency, shock improvement and a smaller overall footprint. Starting as low as $579, the dc5800 Business Desktop PC, available in redesigned small form factor and microtower PC designs, offers a range of productivity tools and security features. "HP's ongoing efforts to design for the environment have spanned decades," Alan Reed, vice president and general manager of personal systems group at HP, said in a statement.

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