10 Reasons Why HP Revenues Hit $100 Billion

Hewlett-Packard's 2007 annual revenues shot past the $100 billion mark for the first time with sales reaching $104.3 billion for the year ending Oct. 31. Here are 10 factors that helped make HP a $100 billion baby.

1. Hired Carly Fiorina as CEO. What's this you say? One of the most controversial industry CEOs in recent memory, Fiorina never figured out the HP Way and her tenure was marked by internal struggles. But she did engineer the takeover of Compaq. Only Fiorina, the consummate corporate politician, could have fought the Hewlett family and widespread shareholder and employee dissent to garner enough votes to swing the $87 billion merger. That merger transformed HP into the industry standard server powerhouse and wrestled the lead in the PC industry away from Dell.

2. Fired Carly Fiorina. She honchoed the deal through, but she couldn't get the Compaq and HP people on the same page. The two cultures clashed between the volume Compaq mentality and the value HP mindset. Nowhere was that more evident than on the channel side of the business. HP value players couldn't stomach the pump up the volume music foisted upon them by former Compaq folks thrust into key channel positions. Thankfully, the HP board finally said enough to this infighting and gave Fiorina the golden parachute.

3. Refused to break up the company. Many shareholders, analysts and industry pundits felt that the HP crown jewel was its printing and imaging business. Spinning that out into a separate company, they reasoned, offered the best hope to recoup the value on what they maintained was an ill plunge into the low-margin PC business via the Compaq merger. As it turns out, HP now has the most complete product portfolio with which to go after the coveted SMB market.

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4. Enlisted the channel as a strategic ally. What good is the best SMB product portfolio without an army of solution providers to attack the market? Dell's newfound channel religion shows the limitations of a direct strategy. And IBM's sale of its PC business shows the danger of getting out of what it deemed to be a low-margin market segment. Sure the margins are low. But IBM lost contact with SMB solution providers as a result of the PC sale and HP was more than happy to fill the void.

5. Hired Mark Hurd. HP needed an outsider with operational experience and no agenda. He eliminated many redundancies and quelled much of the infighting. Hurd too takes the time and effort to meet with and listen to solution providers. Most high-profile CEOs view the channel as a faceless, amorphous beast. Hurd's taken the time to learn that the channel is human—good, bad and ugly. Under his guidance, HP's tried to embrace the good, and it's paid off. As one solution provider said Monday after hearing HP cracked the $100 billion barrier, "Hurd's the man."

Next: Conflict Resolution, Profitability, Channel Marketing All Make A Difference

6. Focused on reducing direct versus indirect conflicts. You can have rules of engagement, well-crafted channel programs and named direct accounts, but it's all a charade unless compensation plans back them up. Hurd's given his sales people quotas that are impossible to meet without strong collaboration from solution providers that add sales coverage and expertise not available inside HP.

7. Made HP products profitable for solution providers to sell. Of course product margins aren't anything to shout about, but at least HP is trying. They've come up with the Attach Plus program that allows solution providers to gain more margin by bundling more HP products into a solution. Competitors simply don't have the product portfolio to offer anything comparable. In an informal online CMP poll this week, for example, 45 percent of the respondents said they make the most money partnering with HP compared to 15 percent for IBM and 13 percent for Dell.

8. Makes products that don't burst into flames. HP by and large dodged the burning laptop adventures earlier this year. The company actually spends money on R and D with the intent of building better products and solutions. In 2007, HP's research budget topped $3.6 billion. Dell's R and D budget, by contrast, seems to consist of gaining technical expertise by buying up hot companies.

9. Buying hot companies. Okay, so HP does it too. Mercury Interactive was the big one this year, which gave HP a much needed boost in its software business. HP in fact closed 10 acquisitions during its last fiscal year. The key here is that HP has a balance between R and D and acquisition that many of competitors seem to lack.

10. Markets the channel to enduser customers. IBM, for example, too often treats business partners as the crazy uncle no one wants to talk about. Rarely if ever do they mention business partners on analyst or earnings calls, despite the channel contributing more than a third of IBM's product sales. Not so with HP. Hurd, for one, often tells midmarket CIOs that the channel is HP's face to the SMB. If you've got a weapon as powerful as the channel, why not shout it to the world, as Hurd did Monday after the vendor passed the $100 billion revenue mark. "This is as much their [the channel's] victory as it is HP's," he said.