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VB: Let's jump to software. How would you rank the portfolio's competitive position compared to a year ago?
Livermore: HP's software portfolio as compared to a year ago is tremendously stronger based on the set of acquisitions that were done over the last year. If you look at this last quarter, the software business was up 17 percent and OpenView was up 26 percent. HP OpenCall was up 8 percent. Compared to our competitive landscape, that's really great growth for the software business. One of the things we've done with our software is make management really be the cornerstone of our Adaptive Enterprise strategy, and when you look at the things that customers are using to be able to bring better cost control to their environment, better security management to their environment, better service levels and also the ability to be more agile. It all has to do with the management background and framework.
VB: That said, what holes would you like to fill in terms of making acquisitions or new partnerships?
Livermore: At this point, we feel our portfolio is robust between the HP OpenView offering and the functionality that we have ourselves there, and a very broad set of partners that we already have in the environment, we have a complete portfolio. As new companies pop up, we're always evaluating start-ups and very focused functionality to include in our partner program.
VB: Let's take a look at the OS market, Linux in particular. You were first to go from the desktop side of Linux, yet IBM is considered the Linux company. How is this happening, and what does it do for you competitively?
Livermore: Well, we tend to prefer to let the facts guide the definition of who's the leader and who's not the leader. So when we look at market share, we feel very good about our leadership position in Linux, and when we look at our product offerings, we also believe we still have the leading market position around Linux. One of the things our customers tell us, that is working very well, is our multi-OS strategy. We have since [had] the merger and even before the merger, HP was focused in providing Unix, Windows and Linux, on top of that continuing to support our heritage operating environments from pre-merger Digital, Compaq and HP. And we put our software investments around the operating environment, and dollars into management software, virtualization software that tie the operating systems together. So a lot of our interoperability, in fact, comes from the fact that we've got the management software, the virtualization software, and the availability software that goes across all three operating environments.
VB: The cost to you guys can be exorbitant to keep up with so many different flavors. How do you balance that?
Livermore: The maintenance on the legacy stuff for us is an important value to our customer base and the most important thing we can, in fact, do for our customer base is to continue to support those environments, so as they have migration desires in the future, they migrate with HP. One of my very strong beliefs is you must take care of your installed base well, because your installed base is a very important set of customers, and installed bases that are supported well tend to stay with that company as they migrate to new environments.
VB: Looking at storage, you have lost some significant share to EMC. What's happening there?
Livermore: We introduced a whole suite of new products back in April, we have a new set of product offerings to our customer base, so we feel we've got a very strong product portfolio. One of the things we're doing right now is to work with our channel partners from a storage perspective. We are working hard with our value-added resellers to increase their participation with HP in the storage market, and we also are in a situation where we need to have more sales specialists than we had in place. So we are going through a process where HP is adding some additional sales specialists to our sales force in the storage space.
VB: Will these be HP salespeople calling on user accounts or channel accounts?
Livermore: Both. They are both resources who will be working with our channel partners.
VB: Could you give us an update on the philosophy on selling to accounts direct vs. indirect? Will any change in strategy result in a change in the mix one way or another?
Livermore: As you know, for most HP product categories, we have multiple sales [channels] from every product that we have from low-end printers all the way up through the NonStop computers, where we work with value-added resellers, sometimes volume resellers and, in some cases, our indirect sales, so we will continue with that strategy and implementation, and you'll see us be very explicit with our partners so we communicate to them our strategy whatever it is on each of the lines of business. In the storage market, we believe we have upside with both our value-added resellers as well as our direct sales reps because the customer demand is there.
VB: That said, EMC has grabbed significant share. How concerned are you about that?
Livermore: We are very focused on growth inside the storage market. We believe it's a very important market space for us. We feel very good about our product portfolio. We're seeing very strong customer interest around our information life-cycle management offerings, the Persist acquisition that we made about a year ago has provided to customers a very attractive ability to be able to index, archive and do rapid retrieval of e-mail-based information. It's a question of how do you do the archiving--the indexing, archiving and the rapid retrieval of information--these capabilities from the Persist acquisition that we did are right dead on the mark.
VB: So do you believe the market-share numbers will turn in favor of HP again?
Livermore: Well our focus is certainly 100 percent on gaining back share and winning in the marketplace. We believe we are well-positioned. We believe we have had some sales-execution issues; we think they are all in our control to fix. It's a tough market, and we take our competition very seriously but we feel very good about the capability we have.
VB: You have been very open with your partners about your desire to extend the business taken direct. Given the trouble you most recently had in the last quarter, is there any new thinking in terms of the need to step up the amount that you're trying to sell direct?
Livermore: Our belief is to be a leading market-share owner in any category, that you have to have multiple channels of distribution. We've said that for years. We still believe that. So what you will see us doing is trying to gain share through every channel, through more direct, through more in the channel, and gain share through our sales reps.
VB: You've been with the organization for many years. You've seen highs, you've seen lows. Give us a sense as to where you're at with regard to the most recent news and the tumult of the last quarter?
Livermore: My view is that despite what happened in the third quarter, I think that HP has one of the strongest product portfolios that I've ever seen, that HP has a very loyal customer base, and that HP has very strong fundamentals when you look at both the balance sheet and the income statement and most of all our businesses. And we had some execution issues, all of which are under our control. So if you're an executive at any company in the world, and you had a bad quarter, that's the way you'd hope it could be because those are all things within your control to fix. You hate that it ever happened, but everything that was an issue for us was in our control to fix.
VB: So when we read the Merrill Lynch report, where [Merrill Lynch analyst] Steven Milunovich suggests you should break the company up and free and unleash all the hidden equity there, is that nonsense? Do you take some of that seriously? Do you re-evaluate the strategy?
Livermore: Several times during HP's past, we have gone through the evaluation of does the company have the strongest strategy and the best value as independent entities, or as one overall organization. That is something our board has evaluated numerous times, and every time we have come back to the same conclusion that the power of our portfolio is quite amazing. Look at what Dell is trying to do. They're trying to get into the printer business. And look at what [former chairman and CEO Lou] Gerstner said about IBM"his biggest mistake was exiting the consumer marketplace. So there are many competitors who covet the portfolio that we have today. We believe that very often, the analysts and the people who watch the market don't see important factors or trends until after they've happened. Our belief is the power of the portfolio we have is an important thing.
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