HEWLETT-PACKARD ANNOUNCES BREAKUP PLAN AS TECHNOLOGY LANDSCAPE SHIFTS

Original Story: nytimes.com

Hewlett-Packard confirmed on Monday that it planned to break into two companies.

The company, considered a foundational institution of Silicon Valley, said in a news release that it intended to divide itself into a company aimed at business technology, including computer servers and data storage equipment, software and services, and a company that sells personal computers and printers.

Both companies will be publicly traded. The business-oriented company will be called Hewlett-Packard Enterprise, while the PC company will be called HP Inc. and will retain the company’s current logo. The transaction is expected to be completed by October 2015, the end of HP’s fiscal year, the company said.

In a statement, Meg Whitman, HP’s chief executive, said the company was splitting up to “more aggressively go after the opportunities created by a rapidly changing market.”

While Ms. Whitman, who became chief executive in 2011, depicted the historic decision as a natural part of her five-year turnaround plan, she had previously resisted the idea of breaking up the company. HP was one of the world’s top buyers of semiconductors and other computer parts, she had argued, giving it pricing power superior to its rivals.

Dividing in two, she said on Monday, “will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics.” This will make HP more competitive, she said.

Ms. Whitman will retain much power at both companies. She will be chief executive of Hewlett-Packard Enterprise and will serve as nonexecutive chairman of HP Inc. Patricia F. Russo, currently a director of HP, will be chairwoman of Hewlett-Packard Enterprise. Dion Weisler, now head of HP’s printing business, will be president and chief executive of HP Inc.

The company also added to the number of prospective job cuts. In an earlier conference call with analysts, it said it had “identified opportunities for incremental improvements” in its plan to eliminate a total of 50,000 jobs through layoffs and retirements. It now expects the number to be 55,000.

The company said its financial analysts’ meeting, scheduled for Wednesday, had been postponed.

“HP’s board and management have made a brilliant value-enhancing move at the perfect time in the turnaround,” Ralph V. Whitworth, founder of Relational Investors and a former Hewlett chairman, said in a statement on Monday. “The new companies will be better positioned to address today’s light-speed market dynamics and customer needs, and with distinct and compelling financial profiles and strong leadership teams, accelerate growth and shareholder value creation.”

The company’s shares closed up 4.7 percent Monday at $36.87, a gain of $1.67.

In a little over a year, stalwarts like Microsoft, IBM and Dell have changed chief executives, sold big parts of their businesses or gone private. All of them, along with a host of other companies that became behemoths during a 20-year boom in personal computing and the Internet, are rushing to cope with the rise in mobile devices connected to cloud systems.

Cloud computing uses software to turn numerous computer servers, sometimes a million or more, into single entities. These flexible systems can distribute work with greater efficiency, cutting the overall need for servers, and interact easily with other computers, whether in clouds, PCs, or mobile devices.

Winners in the new landscape include Apple, the king of consumer electronics, with annual revenue of $170 billion. The company makes iPhones, iPads, and hosts through its online stores a wealth of cloud-based software applications. South Korea’s Samsung, the other big winner in smartphones, has dominated the competition, forcing onetime leader Nokia into a sale of its phone business to Microsoft.

In business computing, Amazon’s cloud-based rentals of computer power and software to businesses, Amazon Web Services, has sharply lowered the cost of starting a company and hosts businesses like Netflix, Pinterest, and Airbnb. Many established businesses also use Amazon Web Services, which is estimated to have well over a million computer servers. Google has built online word processing and spreadsheet businesses that threaten Microsoft, and is challenging Amazon Web Services for the corporate cloud business.

HP was long the world’s largest computer company, though there has been much turmoil in recent years. The two businesses resulting from the proposed split almost evenly divide HP’s fiscal 2013 revenue of $112 billion. On their own, both would easily fit in the top half of the Fortune 500.

HP’s split is not the first time the company has hewed itself in two to cope with changing times. In 1999, its test and measurement equipment division was started as a separate company, called Agilent. Shares in Agilent rose 41 percent on their first day, and the company was completely spun off HP in 2000. The stock was already declining by then, however, and today Agilent has a market capitalization about equal with its first day’s value.

Agilent, as the name suggests, was also split off in the interests of agility, at that time in the face of the first Internet boom. While HP benefited in those years from PC and server sales, management also felt the company was not moving fast enough for a changing world.

H.P. to Work With Hynix on New Computer Memory Chips

NY Times

 

SAN FRANCISCO — Hewlett-Packard said Tuesday that it would commercialize a new computer memory technology with Hynix, the South Korean chip maker.

Hynix’s agreement to build computer memories using a technology H.P. scientists developed called memristors indicates that more computer memory will be packed in even smaller devices in the second half of this decade. The two companies said the memristors will be commercially available in about three years.

To date, the memristor’s most likely application is for dense nonvolatile memories, which is what is used in flash memory cards for products like cameras and PCs. It is not out of the question, however, that it might play a role in other kinds of chips, including microprocessors, in the future.

The agreement to build the memory chips validates the work of Leon O. Chua, a University of California, Berkeley, electrical engineering professor. In 1971, he proposed a fourth basic circuit element (the other three are the resistor, capacitor and inductor) and called it a memristor, or memory resistor, as a simpler alternative to transistors. The idea languished for many years before a team of H.P. researchers found a way to use it in 2006. Since then, memristors have attracted industrial, academic and military interest, but have not gone beyond being laboratory curiosities.

Competing in the memory business will not be an easy battle. Memristors are still viewed as laboratory and academic experiments by the majority of the world’s leading semiconductor firms, most of whom have settled on a competing technology known as Phase Change Memory, or P.C.M. However, H.P. scientists said they traveled the world discussing memristors with all of the leading chip makers before settling on their commercial development agreement with Hynix, the world’s second-largest maker of memory chips behind Samsung Electronics.

“Right now the memristor outperforms flash,” said Stan Williams, an H.P. Labs scientist who has led the development effort. He said the tiny switches could be turned on and off more than 100 times as fast as flash, use a tenth of the energy and have a much greater lifespan.

The storage densities are already staggering and will become even more impressive in the future. Next year the most advanced flash storage chips will have a capacity of roughly 64 billion bits per square centimeter, according to the industry’s annual road map. By 2014, that is expected to increase to 170 billion bits per square inch. Rice University scientists said that memristive storage devices could be five times as dense as the industry standard in 2014 and that the technology was more easily adaptable to three-dimensional packaging. That would make it possible to build even vastly denser chips.

H.P. researchers have described ways to design 1,000-layer memristor-based chips, although they acknowledged that with current manufacturing techniques such devices would not be practical.

M and A Tech Battles

International Business Times

Major technology companies seem to be launching multibillion-dollar acquisitions every other week, and those who don't join the race may be at risk of getting run over.

Hewlett-Packard Co challenged Cisco Systems Inc this week by announcing a $3 billion deal for network equipment maker 3Com. It came after Cisco stepped up its dealmaking and expanded into the server market to compete with HP, IBM and Dell Inc.

"I think this is the start," said Ronald Gruia, analyst at Frost & Sullivan. "Once you have one acquisition, you can have a cascading effect."

The motivation behind this wave of dealmaking by the tech majors is to broaden product portfolios and provide for all of customers' IT needs -- from computing, security, storage and networking to online videoconferencing.

HP's 3Com deal comes after a string of M&A news including Dell's deal for Perot Systems Corp, Xerox Corp's deal for Affiliated Computer Services Inc and Oracle Corp's deal for Sun Microsystems.

IBM, which bid for but failed to win Sun, has been comparatively quiet on the dealmaking front, doing some smaller deals to expand its services business and signing sales partnerships but nothing viewed by Wall Street as a game changer.

Pressure is mounting on technology companies to diversify to satisfy shareholders' demands for more dramatic sales growth as the economy recovers, analysts said.

"There are three big enterprise infrastructure vendors today: IBM, HP, and now Cisco. And they're all competing against one another," said Broadpoint AmTech's Brian Marshall.

Smaller, niche technology firms, on the other hand, are increasingly open to buyouts as a way of securing a solid sales channel. A smaller company bought by a large vendor like Cisco or IBM could turn into a serious competitor overnight.

M&A deals are also a response to customers looking for simpler and cost-efficient ways to run data centers, which are struggling to cope with increasing data traffic.

"All of us are under pressure in the IT environment to allow businesses to do more with less," VMware Chief Executive Paul Maritz told Reuters in an interview. "People are trying to say, rather than selling everything piece by piece on an a la carte basis, requiring customers to be their own master chefs, we're going to sell more prepackaged meals here."

BROCADE, RIVERBED, F5

Companies like Riverbed Technology Inc and F5 Networks Inc, which specialize in supporting faster and more secure online applications, are widely seen as possible acquisition targets.

F5 shares have risen 75 percent in the last six months, though Riverbed is up only 18 percent. Both companies trade at around 25 times forecast 2010 earnings.

And while HP's offer for 3Com made it look like Brocade Communications Systems Inc may have missed out, some analysts said the switching and storage networking company is still an attractive target.

"I think Brocade is still definitely in play," Gruia said, adding that IBM could be a buyer. Brocade shares have fallen more than 12 percent since HP announced the 3Com deal.

Most analysts, however, said IBM is likely more interested in expanding in software and services than hardware. It has bought business analytics company SPSS Inc for $1.2 billion.

"They're really going to focus on software because that's where the value and the real margin structure in growth is," said Marshall.

Analysts say HP and Dell could also do more deals, and many see network equipment maker Juniper Networks Inc eyeing M&A to compete against Cisco.

Other acquisition targets include wireless technology firms as well as companies specializing in online video, analysts said. They are particularly focused on Polycom, whose bigger rival Tandberg is being courted by Cisco. The Tandberg deal is not yet final as some shareholders are seeking a higher price.

PARTNERSHIPS

Polycom CEO Robert Hagerty said that rather than find a buyer, it was trying to boost sales partnerships with vendors like HP and IBM. That is similar to the strategy at Brocade, which has forged more deals with IBM and non-Cisco vendors.

Analysts said depending solely on such partnerships may leave many companies vulnerable. Resale partnerships can be cast aside when one party enters an M&A deal with another.

For example, video network infrastructure company Radvision is a close partner of Cisco, but analysts say some of its sales are at risk if the Tandberg deal goes through.

But some also note that acquisitions themselves are high-risk endeavors. Cisco chief John Chambers has said that around 90 percent of acquisitions fail, in general.

"As we all understand, the vast majority of acquisitions fail, and truly meaningful strategic alliances have an even poorer success rate," Chambers told analysts recently.

The cross-Atlantic merger of Alcatel-Lucent, which posted its 12th straight loss in the third quarter, is widely cited as a failure.

PC Shipments Continue Slide In Q1

AP Story

FRAMINGHAM, Mass. — Technology research group IDC says worldwide personal computer shipments fell in the first quarter of 2008, though not as badly as expected.

IDC says PC shipments sank 7.1 percent around the globe, while in the U.S. shipments of personal computers, including Dell PCs only dropped 3.1 percent.

IDC was looking for even steeper declines in PC shipments, but researchers say low prices on personal computers, including cheap personal computers and back to school desktops are popular as well as surging interest levels in small, inexpensive notebooks and netbooks have helped keep the personal computers market afloat.

IDC predicts declines in personal computer shipments April-August of 2009, but says the personal computers sector could turn around in the fourth quarter as back to school and holiday shopping seasons could be robust for cheap laptops and used desktops.

Low Cost Hewlett Packard Computers edged out Dell PCs for the top spot in the U.S.

Amid Sluggish Growth, Ex Partners Become Rivals In Techno Turf War
As Originally Posted at The Wall Street Journal

With a big product launch Monday, Cisco Systems Inc. is propelling the technology industry into a new era: Giant companies that once prized profitable cooperation are invading each others' turfs.

Cisco announced it will start building its own servers, the powerful machines that run corporate computer colocation centers across the globe. Its "blade" server, which it designed and developed for two years under unusual secrecy, places it in direct competition with long-time partner Hewlett-Packard Co.

For years, Cisco enjoyed heady growth in its core business of making the switches and routers that allow computers to communicate with each other. Hewlett-Packard dominated the server market. The two cooperated with each other, as well as with the makers of storage devices and software, each providing complementary pieces of the data centers that make corporations and the Internet run.

But that has been changing in recent years. The maturing tech industry has set giant companies on a collision course, as once-disparate technologies take on new capabilities in a "convergence" of computers, software and networking. With the recession expected to shrink sales across the industry, tech companies are turning on each other in their search for growth.

Since Cisco's core networking markets began slowing in 2005, it has taken on the likes of H-P, Microsoft Corp. and International Business Machines Corp. It is also picking new fights as it expands into home electronics and entertainment systems for sports stadiums.

Cisco Chief Executive John Chambers says the company expects to deploy its hoard of cash during the economic downturn to expand further into areas where it hasn't historically competed. In February, the San Jose, Calif., company took on $4 billion in debt in part to add to its war chest for acquisitions. "The fact that we have $29.5 billion gives us a huge competitive advantage," Mr. Chambers said in an interview just before raising that capital. "Cash is king, queen and the royal family."

Cisco's new rivalry with H-P provides a particularly good window into the industry's latest offensives. As Cisco moves onto H-P's territory, H-P is stepping up its own investments in networking gear that competes with Cisco's.

Those outside Cisco say the move into servers could be difficult. "This is, by far, the riskiest, most bold move they [Cisco] have made in their history," says Zeus Kerravala, an analyst at tech research company Yankee Group.

Cisco's chief technology officer, Padmasree Warrior, says the company has moved boldly in the past, and suggests the old rules are changing. "We're going to compete with H-P. I don't want to sugarcoat that," she says. "There is bound to be change in the landscape of who you compete with and who you partner with."

Battles are breaking out across the industry. Within the past year or so, H-P has fueled a new rivalry with IBM in tech outsourcing by buying services giant Electronic Data Systems Inc. Microsoft set its sights on Internet-search giant Google Inc. by attempting to buy Yahoo Inc. Sun Microsystems Inc. is moving beyond its core market in servers and software to take on database-software leader Oracle Corp. Later this month, Dell Inc. says it plans to introduce new data-center management software that will compete with existing offerings by H-P, IBM and others.

Other growth industries have followed similar paths into maturity. General Motors Corp. expanded years ago into defense contracting, computer services and mortgages. Textile companies responded to slowing growth by expanding into chemicals.

In the past, when big tech companies made similar incursions into others' businesses, they often dismissed it as "co-opetition," meaning they planned to compete in some areas and cooperate in others. Brisk growth across tech markets meant that, even while these companies' products increasingly overlapped, there was more than enough profit to go around. But this downturn's severity heightens the impact of these clashes. World-wide tech spending is expected to decline in 2009 -- by as much as 3%, predicts forecaster Forrester Research.

"Tech companies can't continue to satisfy Wall Street's requirements for growth without encroaching into the markets of their long-time partners," says Joe Skorupa, an analyst at tech-research company Gartner Inc. "All of these guys are banging into one another trying to figure out where they are going to grow, and at whose expense."

Cisco's Shift

Cisco's case is remarkable for how dramatically the company has shifted its strategy since the turn of the decade.

Founded in 1984, Cisco undertook a high-profile expansion throughout the 1990s, its revenue growing from $69 million to $18.9 billion over the course of the decade. But even into the new millennium, the company remained focused on selling routers and switches to corporations.

In the past few years, the company's core networking business has grown more slowly than the company as a whole. In its 2008 fiscal year, which ended last July, Cisco's networking business grew 10%, down from 16% the year before.

Cisco has compensated by expanding into new areas. It is using its Linksys and Scientific Atlanta brands, which it acquired this decade, to get into people's homes with wireless networks and cable boxes. It is butting heads with Microsoft over a recent move into technology that unifies email, telephone and voicemail. It has started installing big-screen networks in sports stadiums. Cisco is also taking on physical security companies by pushing video-surveillance systems.

In January, the company introduced a line of wireless home speakers aimed at consumers, a move unimaginable a few years ago. "It's definitely intimidating," says Adam Castillo, a marketing director at Avid Technology Inc., which sells competing products through its M-Audio division. Mr. Castillo says that Cisco's overall size and manufacturing strength immediately make it a force in the segment.

Cisco's fiercest turf battle is over the data center, the giant computing rooms where companies store, process and route information. Businesses will spend about $100 billion on data-center software and hardware in 2009, research company IDC forecasts.

Data centers typically have been a cozy symbiosis of products from a mix of companies: Cisco networking gear runs alongside servers from H-P or IBM or Dell; software from Microsoft runs along with programs from BMC Software Inc. or VMware Inc. But as lines between software, hardware and network technologies have blurred in recent years, companies like Cisco see an opportunity to grab more data-center dollars.

That's a reversal from 2003, when a team at Cisco studied the market for servers to see if Cisco should make its own. The group concluded that the market was big -- around $50 billion a year. But Cisco decided not to develop a server, say people familiar with the discussions. Profit margins were low, the company decided. The cost of entry would be high, as the most successful server sellers have armies of consultants who help companies choose which equipment to buy.

Plus, setting up a server business would mean competing with IBM and H-P, two partners that were generating huge revenues for Cisco. Field consultants for the two tech giants were pitching not only IBM or H-P servers but also Cisco products -- sales that currently account for $2 billion a year, or 5% of Cisco's overall sales, according to Pacific Crest Securities Inc. H-P's then-CEO, Carly Fiorina, was a Cisco director.

The goal then was to not upset IBM or H-P, say people familiar with the decision.

H-P Moves In

Allegiances began to change in 2005, when Mark Hurd took over as H-P's chief executive. The Palo Alto, Calif., company had been making its own networking gear for more than 20 years, but its ambitions for the products had been modest. Mr. Hurd called attention to the networking products during a company meeting shortly after he was named CEO, says a person who attended -- a surprise because the unit had a low profile under Ms. Fiorina. Mr. Hurd pushed H-P further into the profitable networking-gear business, emphasizing H-P networking gear over Cisco's.

That year, H-P increased its investment in developing new networking products, says Marius Haas, who now heads the networking division. The company would also eventually increase the incentives for its sales force to sell H-P gear, rather than certain Cisco products.

By 2006, the amount of Cisco equipment sold by H-P and IBM was no longer growing at the same rate as Cisco's own sales, say people with knowledge of those numbers.

Cisco laid the groundwork for a counterattack in August 2006, when it paid $50 million for a controlling stake in Nuova Systems Inc., a networking start-up. In early 2007, Mr. Chambers authorized Nuova to develop a Cisco-branded blade server, say people familiar with the matter. Nuova operated as an independent unit with its own offices, heightening the project's secrecy.

Blade servers, named for their slim vertical profile, are the fastest-growing part of the server market. H-P had 55% of the blade-server segment by revenue in the last quarter of 2008, according to research company IDC, followed by IBM with 22%. IBM declined to comment for this article.

Some Cisco executives still agreed with the 2003 analysis that favored partnerships, arguing that taking on H-P in servers was a bad business move. Big tech companies, says one person involved in the project, will often bump up against each other in overlapping projects, but will benefit from remaining cooperative on others. "There are always smoldering fires," this person says. "Deciding to build a server was deciding to pour gasoline on a smoldering fire."

Nonetheless, Cisco moved ahead. By fall 2007, the company was touting the server to customers, say people familiar with its sales presentations. But Cisco didn't tell H-P about the project, even though the two companies routinely had detailed sales discussions, say people familiar with the talks, and maintained an official strategic alliance that continues to exist.

Mr. Chambers kept a tight lid on the project. Ms. Warrior, Cisco's chief technology officer, met with the Nuova team in her first week with the company in March 2008. But she says she didn't learn of its server plans until the next month, when Cisco bought the rest of Nuova. H-P wasn't convinced that Cisco was planning to sell its own server until the second half of 2008, say people familiar with H-P's dealings with Cisco.

Ms. Warrior says the company's system isn't intended as a direct replacement for models from H-P and IBM. She says it is unlike others on the market because it combines server and network, eliminating the need for information-technology staff to integrate the components on their own. It also automates some functions that are currently separate.

To make up for its lack of an in-house consulting business, Cisco in February aligned itself with Accenture Ltd. and India-based Tata Consultancy Services Ltd. Both companies will establish practices to sell Cisco products to businesses.

H-P has stepped up its offensive. For the past several months, it has been trying to fill "holes in our portfolio" by increasing its networking offerings to many large corporate clients, says Mr. Haas, H-P's networking chief. Last fall, members of Mr. Haas's staff started calling smaller companies that sell networking products that compete with those made by Cisco. In the last few months of 2008, H-P struck deals with more than a dozen of them, packaging their products into a single piece of H-P networking gear.

The new product, which H-P rolled out in January, comes with free product updates -- a service Cisco customers need to pay for -- undercutting Cisco's prices, say analysts and companies that sell Cisco gear. Another consideration is he launch of server colocation managed services in key markets across the country. Some scenarios include:

Atlanta Colocation

Chicago Colocation

Los Angeles Colocation

New York Colocation

and more.

The turf grabs have gained the attention of the independent consultants who assemble computer networks and data centers that include Cisco equipment. Some of these Cisco resellers spent half an hour at a recent meeting with Cisco executives, complaining that they were losing sales because they couldn't compete with H-P's offer of free support. Cisco's execs had no answer at the time, according to a person who attended the meeting. Another Cisco reseller said "my phone blew up" with calls from angry Cisco executives when he recently announced plans to sell H-P's networking gear as well.

Since then, Cisco has started offering 0% financing on some of its equipment. Overall, Cisco says, resellers account for 80% of its revenue. "Over the years, we've addressed numerous competitive challenges with our partners," says Keith Goodwin, a senior vice president. "Our track record of success speaks for itself."

Touch Is the Future at H-P

Hewlett-Packard Co. is hot on the prospects of touchscreen technology.

H-P says it's working on an array of products, including notebooks, that use the same type of finger-tapping interface popularized by Apple Inc.'s iPhone. H-P's so keen on the idea that it says it's trying to get touch-enabled notebook computers on the market within the next 18 months.

"We're focused on recognizing the potential of touch now," said Phil McKinney, the chief technology officer for the company's laptop-making Personal Systems Group. "We see touch as the almost preferred method for nontechnical users." Users also use Dallas Colocation and Atlanta Colocation.

H-P's plans illustrate how the iPhone has whetted the world's appetite for touchscreens, which have become increasingly available on handheld devices and are now making their way into the personal-computer sector. Several competitors already have touchscreen desktops, but few have laptops with touchscreens.

A hit with touchscreens might help the Palo Alto, Calif., company's sagging stock price. H-P's shares are down about 11% year-to-date to $45, as the company fights stiff competition from Dell Inc. and weakness in overseas markets.

Market research suggests H-P is making a smart bet. The number of touchscreen devices, including PCs, should more than double to 800 million by 2013, according to industry tracker iSuppli. Spending on touchscreen components likely will reach $6.4 billion, up 33% from $4.8 billion, over the same period, iSuppli said.

Much of that demand likely will come from notebook-computer makers.

"Touch represents the interface of the future," said Richard Shim, an analyst with IDC.

The iPhone helped to solidify the trend. Since June 2007, the gadget has proved the mass appeal of computing devices that are manipulated by touch-sensitive icons and other screen prompts. More than 6.1 million iPhones have been sold since their debut.

Microsoft Corp. has fueled the move, too. The software titan said in June that it is adding touchscreen capabilities to its next operating system, which is due around 2010. The inclusion of touch functions likely will prompt even further adoption of the technology, analysts said.

No. 2 computer maker Dell already has an array of touchscreen products, including flat-panel monitors for $618. And it, too, has been revving up new touchscreen products. Two and a half weeks ago, the Round Rock, Texas, company said it would start offering free software updates to add multitouch capabilities to its Latitude XT tablet. It also has begun offering touchscreen options on a number of other computers.

That's led to talk about touchscreen notebooks from Dell in the future. A Dell representative had no immediate comment.

At this point, Apple doesn't appear to be joining the fray, even though it helped spark the trend. But Apple's Macintosh computers already have the same multitouch capability built into a track pad on the computer's console. Apple declined to comment.

By: Ben Charny
Wall Street Journal; August 6, 2008

Former H-P Executive Pleads Guilty

Malhotra Could Get Jail Time for Stealing IBM Trade Secrets

A former Hewlett-Packard Co. vice president pleaded guilty Friday to stealing trade secrets by passing a confidential email from his previous employer, International Business Machines Corp., to senior H-P executives, the Justice Department said.

Atul Malhotra, 42 years old, faces a maximum of 10 years in prison, a $250,000 fine and three years of supervised release. A spokesman for the U.S. Attorney's office in San Francisco declined to say what penalties prosecutors would seek. A sentencing hearing is set for Oct. 29.

John Vandevelde, Mr. Malhotra's attorney, called his client "an honorable man with an impeccable record" who "made one mistake in transitioning from one high-tech job to another." Mr. Malhotra "has admitted that error and entered into an agreement that will resolve this matter," the attorney said in an email. Mr. Vandevelde said that "the court will be able to consider probation in this matter," rather than jail time.

Mr. Malhotra was a director of sales and business development at IBM in March 2006 when he requested pricing information about IBM services, prosecutors say. Two months later, he became a vice president of H-P's printing division.

That July, prosecutors allege, Mr. Malhotra sent an email to an H-P senior vice president with the subject "for your eyes only." A file with the confidential information was attached. Two days later, Mr. Malhotra sent a similar email to another H-P vice president.

An H-P spokeswoman said that in response to the emails, the company "conducted an internal investigation, terminated Malhotra's employment from H-P and reported the activity to appropriate enforcement agencies and to IBM."

By: Justin Scheck and Lauren Polluck
Wall Street Journal; July 14, 2008

H-P's Ann Livermore Keeps Eye on 'Team'

Ann Livermore, head of Hewlett-Packard's storage and servers, software and services businesses, has faced decisions in her company that might have sent some executives heading for the door. But despite deals that cut into her territory, she keeps her focus on the big picture, on the challenges at hand, and on new opportunities for growth. It's all part of knowing that "business is a team sport," she says.

That sentiment isn't common among business leaders these days. Many senior executives are more focused on their individual well-being than on furthering their company's goals. They're quick to jump to new employers when they don't feel appreciated.

Some outside H-P had speculated that Ms. Livermore was unhappy about relinquishing part of her portfolio after the company announced plans to acquire Electronic Data Systems, based in Plano, Texas, an IT outsourcing company. Under the agreement, the outsourcing portion of H-P's services businesses -- about 13% of the group she runs -- will become part of EDS under its current chief, Ronald Rittenmeyer. Mr. Rittenmeyer will report to H-P CEO Mark Hurd.

She says she's staying put. "This isn't about me," she said in an interview. "It's about doing what is best for H-P. It makes sense to combine all outsourcing businesses -- and with a merger this big, for EDS to report directly to Mark," to ensure the best integration.

When does staying put and taking on an important No. 2 or No. 3 role benefit you and when is it a sign of surrender? Join a discussion on Front Lines.

This doesn't mean the 49-year-old Ms. Livermore has taken a place on the sidelines. Her division reported $37.7 billion in revenue last year, or 36% of H-P's total. Her office at H-P's Palo Alto, Calif., headquarters is about 20 feet from her boss, Mr. Hurd, who describes her as "one of the best executives I know. She's running a huge business and doing that very well."

Ms. Livermore helped develop strategy for the EDS deal with Mr. Hurd. Like him, she knew H-P on its own couldn't expand its outsourcing services enough to meet demand.

"Just before Christmas, I was talking to two large financial institutions, a manufacturing company and a government organization that all had very large IT outsourcing opportunities for us, but we didn't have the resources to respond,' she says. "By combining our outsourcing business with EDS, we'll have tremendous scale and be able to respond to every opportunity."

She has plenty of growth businesses to lead. Among these: blade systems, the No. 1 growth market in servers.

"I have one of the biggest and best jobs in technology," says Ms. Livermore, who earned $10.4 million in salary and bonus, and had equity valued at $4 million in fiscal 2007. "As much progress as H-P has made in recent years, there's still so much more we can do -- and I'm eager to make that happen."

The 26-year H-P veteran, a Stanford M.B.A., has had her share of setbacks and comebacks. She was on the phone with Mr. Hurd just four days after having a kidney transplant in 2005. She took a five-week leave but hasn't slowed down since returning to work.

In 1999, she lost out to Carly Fiorina for the CEO job. And in 2005, Mr. Hurd was recruited to fill the post. Rather than jump to another company, she became a supporter of Ms. Fiorina, with whom she's still friends, and then of Mr. Hurd. "I realized my own strengths complemented both of theirs," she says.

For one, she says she understands how processes and people work at the company. She also is focused on customers, talking to two or three big ones every day. And she has a reputation for identifying market trends. When she visited a dozen financial-services companies several years ago, she listened when IT executives said they were spending too much time and money operating their data networks.

Out of those conversations came H-P's strategy for building "the next generation of [automated] data centers, which is now driving growth in software and services," says Ms. Livermore.

As one of three senior-ranking women at H-P and the only one in a line job, Ms. Livermore says she was helped early on by a boss who was committed to building a diverse management team. "This was the early and mid-1980s and 25% of his management team was female," she says.

She remembers that when Mr. Hurd first arrived at H-P, he told her, "The numbers tell the story." Her story: In the Technology Solutions Group she heads, operating profit was $4.2 billion, or 11% of the unit's revenue, last year. In the last quarter, operating profit surged 38%.

By: Carol Hymowitz
Wall Street Journal; June 2, 2008