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How Hewlett-Packard can be saved

CNET News.com's Michael Kanellos gives incoming HP CEO Mark Hurd a few words of advice...like ditch the Gulfstreams.

To Mark Hurd, CEO, Hewlett-Packard:

Congratulations. You have taken on one of the most prestigious and difficult jobs in the computing industry, and for a reasonable $20 million a year for the first year--or $54,790 a day, including weekends.

No doubt you're contemplating retaining consulting firms to advise you. Instead, I offer my advice for free. You'll save $700,000 on consulting fees (that's about eight entry-level employees--plus insurance--you won't have to fire), and you can print as many copies as you want.

In a nutshell, you need to:

1. Embrace Canada as a model
Canada. As a nation, it will never stride the world like a colossus, rearranging political borders or altering fundamental economic relationships. Then again, you'll never see European intellectuals pooh-poohing the cultural imperialism of "Hockey Night in Canada" or other shows from the Canadian Broadcasting Corporation.

In the computing world, HP is Canada. It will never be as big as IBM, nor will it be accused of not being innovative--a label often attached to Dell. You're the friendly alternative. Avis Rent A Car made a fortune off this approach.

2. Make money on hardware
For years, Dell has typically been the fastest-growing and most profitable PC company. If computers were commodities, it would stand to reason that Dell's products would cost less than HP's. Actually, the average price of a Dell model is usually higher than that of an HP.

Similarly, Acer has roared back to life in the past year, pitching fancy notebooks to Europeans and Asians.

By contrast, HP is all over the map. Last year, it offered free DVD-burners on consumer desktops--a high-end feature in low-end PCs. Was the company trying to woo bargain buyers or alienate high-end ones? The same issues crop up in its server business.

Charles Smulders of Gartner Dataquest is right: HP will have to exit some geographic territories and markets to concentrate on others.

It could take on a weakened Gateway in the bargain basement, expand efforts in India and China, go upscale in established markets with designer PCs, or a careful combination of all these. In any case, money could be made. It's just a matter of careful planning.

3. Go direct...sort of
HP should sell all business hardware directly but pitch consumer machines through retail. The channel partners, who make most of their profits on service, will understand. Besides, the alternative for the channel will be Lenovo Group, an untested quantity.

4. Become an IP outfit
HP has always had great scientists. It's the marketing that has been clunky and, unfortunately, all the backslapping road warriors who came in with the Compaq Computer deal got fired. Hence, try to license more technology to those who can sell it better. The crossbar latch could pay big in semiconductors.

5. Woo doctors, soldiers and security guards
Three markets are currently thriving: health care, defense and homeland security. Combine their needs with the stuff you have in your labs. At the University of Manchester, researchers are looking at ways to employ inkjet nozzles for spraying human cells. Your guys in the lab have enough nozzles to spray a complete spleen into someone. Similarly, there is a lot of wireless communication know-how at HP, which could add up to a huge push into sensors and RFID.

6. Get out of consumer electronics
CE is fun, but few make money in it. Samsung does, but that's because it makes components, too--a market HP got out of years ago. To be honest, no one yearns to buy an HP TV. Keep the cameras, and ditch everything else.

7. Don't be too uncharismatic
Conventional wisdom says that Carly Fiorina failed in part because she was a bright star at a traditional company. Analysts and internal execs are now coaching you to be low-key, sort of like the guy you might meet behind the counter at PostalAnnex.

These advisers have a good point. HP is very traditional. Dave Packard's office is still there, left in the same exact condition as the day he retired. Employees go in there and leave change, as if he might come back from the dead and want a Diet Sprite.

But don't go overboard. Despite Fiorina's downfall, investors, employees and customers still expect the head person to exhibit that "X" factor of leadership. But you can do it quietly. Michael Dell does. Whenever he speaks, he'll make a few wisecracks about competitors and come up with some spontaneous comment that shows how his thinking works. No, it's not like going to a Van Halen concert, but the effect is there.

8. Get rid of the Gulfstreams
Fiorina could never explain why she needed all those private jets. My suggestion: Trade them all in for a fleet of company Winnebagos. Imagine the rousing welcome you'd get pulling into the parking lot at HP facilities in Greeley, Colo. Let employees sit in the captain's chair and take home the "Trees of Mystery" placard.

9. Dump "Adaptive Enterprise"
It's patently apparent why HP came up with its Adaptive Enterprise strategy for providing ubiquitous computing services. With "On Demand," IBM already had the good name. Just admit defeat and call your offering "Serversaurus."

10. Don't talk too much about splitting the printer business
Spinning off the printer business would do...what? Give the stock a 20-minute boost? Double administrative costs? Prevent you from being able to do bundle pricing? It's an old debate. Cut it off, and live with the results.