DavidEd12CaseStudy07HewlettPackard

7/31/2019 DavidEd12CaseStudy07HewlettPackard

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Copyright 2009 Pearson Education, Inc. Publishing as Prentice Hall 84

Hewlett-Packard 2008

Forest David: Francis Marion University

A. Case Abstract

Hewlett-Packard (www.hp.com) is a comprehensive business policy and strategicmanagement case that includes the companys fiscal year-end October 2007 financialstatements, competitor information and more. The case time setting is the year 2008.Sufficient internal and external data are provided to enable students to evaluate currentstrategies and recommend a three-year strategic plan for the company. Headquartered inPalo Alto, California, Hewlett-Packards common stock is publicly-traded on the NewYork 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. Thecompany 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, TexasInstruments, 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 toconsumers, businesses and institutions globally by providing superior products andservices for businesses and personal consumers (1,2). Our emphasis is based on domesticand global markets (3). We provide information technology systems to serve ourcustomers more efficiently (4). We are dedicated to quality and consistency to maintainand gain customer loyalty (6). We are dedicated to growth and profitability (5) bytreating employees (9) in ways that create extraordinary products for our customers, and

that create high shareholder value, while maintaining a valued name throughout thecomputer and technology industry (8). Hewlett-Packard is synonymous with qualityproducts and high customer satisfaction in every product and service that we provide (7).

1. Customer2. Products or services3. Markets4. Technology


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CPMCompetitive Profile Matrix

Hewlett-Packard Dell IBM

Critical SuccessFactors

Weight Rating WeightedScore

Rating WeightedScore

Rating WeightedScore

Market Share

PriceFinancial PositionProduct QualityProduct LinesConsumer LoyaltyEmployees

0.20

0.100.200.150.100.200.05

3

333434

0.60

0.300.600.450.400.600.20

2

333222

0.40

0.300.600.450.200.400.10

3

244434

0.60

0.200.800.600.400.600.20

TOTAL 1.00 3.15 2.45 3.40

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

Opportunities

1. The worldwide personal computer industryposted its fourth consecutive year of double digitexpansion in 2006, recording 10 percent unitgrowth.

0.07 4 0.28

2. PC shipments in the Asia-Pacific regionexpanded by an estimated 17.6 percent in 2006on a unit basis.

0.06 3 0.18

3. IDCs rest of the world category, whichincludes Eastern Europe, Latin America, and theMiddle East rose 22 percent on a preliminarybasis.

0.05 2 0.10

4. It is estimated that the PC industry will post totalunit growth of approximately 11 percent for2007.

0.08 4 0.32

5. Dells units sold declined 8.4 percent, so Dellsmarket share fell by nearly 300 basis points on ayear-over-year basis.

0.07 3 0.21

6. Over the past three years, Gateways grossmargins narrowed from 14.4 percent in the firstquarter of 2004 to 5.2 percent in the fourthquarter of 2006

0.07 3 0.21

7. During the fourth quarter of 2006, server marketrevenue grew by 5.2 percent.

0.06 3 0.18

8. Dell achieved server market share of 9.4 percenton server revenue growth of 2.4 percent, downfrom 9.6 percent

0.04 2 0.08

9. Worldwide revenues for servers were up 2.0percent to $52.3 billion.

0.05 2 0.10

10. In the first quarter of 2006, IBMs serverrevenue growth of 3.8 percent put its marketshare at 37.9 percent, down from 38.4 percentthe comparable year-earlier quarter.

0.05 2 0.10


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Threats1. IBM maintained its position as the leader in

overall server market revenues in 2006.0.09 1 0.09

2. PC unit shipments in the U.S. declined 0.5percent in the fourth quarter of 2006.

0.01 2 0.02

3. During the fourth quarter of 2006, Apple grewits units by 31.8 percent in the U.S. market.

0.05 2 0.10

4. Suns server market share was 9.7 percent in thefourth quarter of 2006, up from 8.2 percent ayear earlier.

0.04 2 0.08

5. Apples switch in 2006 to Intel-based chipsincreased the processing power of Macs.

0.02 2 0.04

6. IBMs server factory revenues increased 0.8percent.

0.02 2 0.04

7. Sun Microsystemss server factory revenuesincreased 11.2 percent.

0.03 2 0.06

8. Apples improvement in the U.S. market sharefrom 3.3 percent in 2004 to 4.0 percent in 2005,and then to 4.2 percent in 2006.

0.03 3 0.09

9. IBMs high-end sever market share rose to 57.2percent from 53.6 percent as revenues improvedby 6.6 percent.

0.07 2 0.14

10. Sun Microsystemss low-end server marketshare expanded 60 basis points to 8.2 percent.

0.04 2 0.08

TOTAL 1.00 2.50

E. Internal Audit

Strengths

1. HPs unit growth was an impressive 23.8 percent, significantly outpacing the secondand third-place vendors

2. In November 2006, HP completed the acquisition of Mercury Interactive Corp., aprovider of software and services, for $4.5 billion.

3. HPs net property, plant, and equipment increased from $6.5 billion in 2005 to $6.9billion in 2006.

4. HPs worldwide PC shipments market share increased in 2006 to 17 percent from15.7 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.


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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 regulations4.

HPs return on equity is 18.55 percent, while the return in equity of the industryleader in return on equity is 38.93 percent.

5. Managing a geographically dispersed workforce6. 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 vendormarket 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 cycles10.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 % Hewlett-Packard Industry SP-500Sales (Qtr vs year ago qtr) 15.20 11.70 12.10

Net Income (YTD vs YTD) 17.20 29.80 16.40

Net Income (Qtr vs year ago qtr) 27.50 22.60 12.00

Sales (5-Year Annual Avg.) 13.01 7.63 13.12

Net Income (5-Year Annual Avg.) NA 7.68 20.25

Dividends (5-Year Annual Avg.) 0.00 10.98 9.94

Price RatiosCurrent P/E Ratio 16.2 15.7 20.4

P/E Ratio 5-Year High NA 2.9 23.8

P/E Ratio 5-Year Low NA 1.5 6.1Price/Sales Ratio 1.06 1.29 2.37

Price/Book Value 2.91 4.08 3.39

Price/Cash Flow Ratio 11.10 5.00 10.60

Profit MarginsGross Margin 24.4 35.2 34.1

Pre-Tax Margin 8.8 11.8 17.8

Net Profit Margin 7.0 8.8 12.6

5Yr Gross Margin (5-Year Avg.) 24.4 33.6 34.3

5Yr PreTax Margin (5-Year Avg.) 6.2 9.3 16.4

5Yr Net Profit Margin (5-Year Avg.) 5.0 6.6 11.4

Financial ConditionDebt/Equity Ratio 0.21 0.77 1.14

Current Ratio 1.2 1.2 1.1

Quick Ratio 1.0 1.1 0.8

Interest Coverage NA 11.6 42.3

Leverage Ratio 2.3 3.3 4.0

Book Value/Share 14.93 17.50 19.13

Investment Returns %Return On Equity 19.0 27.8 24.6

Return On Assets 8.5 8.7 7.4

Return On Capital 15.2 14.7 9.9


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Return On Equity (5-Year Avg.) 11.6 19.5 18.3

Return On Assets (5-Year Avg.) 5.6 6.2 6.2

Return On Capital (5-Year Avg.) 9.3 10.0 8.3

Management EfficiencyIncome/Employee 42,233 18,434 90,463

Revenue/Employee 606,314 268,908 800,790

Receivable Turnover 7.1 4.9 14.1Inventory Turnover 10.0 4.7 7.6

Asset Turnover 1.2 1.0 0.8

Adapted from www.moneycentral.msn.com

Date Avg. P/E Price/Sales Price/Book Net Profit Margin (%)10/07 16.50 1.35 3.46 7.0

10/06 15.00 1.21 2.77 6.8

10/05 27.80 0.94 2.14 2.8

10/04 18.30 0.71 1.45 4.4

10/03 22.90 0.94 1.80 3.5

Date Book Value/ Share Debt/Equity ROE (%) ROA (%) Interest Coverage

10/07 $14.93 0.21 18.9 8.2 16.410/06 $13.96 0.14 16.2 7.6 19.5

10/05 $13.10 0.14 6.5 3.1 10.1

10/04 $12.90 0.19 9.3 4.6 16.8

10/03 $12.40 0.20 6.7 3.4 10.5

Adapted from www.moneycentral.msn.com

Net Worth Analysis (October 2007 in millions)

1. Stockholders Equity + Goodwill = 38,500 + 21,700 $ 60,200

2. Net income x 5 = $7,200 x 5= $ 36,000

3. Share price = $43.00/EPS 2.68 =$16.04 x Net Income $7,200= $ 115,500

4. Number of Shares Outstanding x Share Price = 2,550 x $43.00 = $ 109,650

Method Average $80,337

Internal Factor Evaluation (IFE) Matrix

Key Internal Factors Weight Rating WeightedScore

Strengths1. HPs unit growth was an impressive 23.8 percent,

significantly outpacing the second and third-placevendors

0.07 4 0.28

2. In November 2006, HP completed the acquisition ofMercury Interactive Corp., a provider of software and

services, for $4.5 billion.

0.08 4 0.32

3. HPs net property, plant, and equipment increased from$6.5 billion in 2005 to $6.9 billion in 2006.

0.04 3 0.12

4. HPs worldwide PC shipments market share increased in2006 to 17 percent from 15.7 percent in 2005.

0.08 4 0.32

5. HP experienced a 8.4 percent increase in worldwidevolume server market share.

0.07 3 0.21

6. HPs high-end server revenues increased 2.4 percent. 0.04 3 0.12


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7. HP remained in the number 1 spot in the fourth quarterof 2006, according to IDC, and gained more than 200basis points of market share on a year-over-year basis,ending the period at 18.1 percent.

0.03 3 0.09

8. In the U.S., HPs market share rose to 24.0 percent from20.6 percent.

0.05 4 0.20

9. HPs server revenue growth was 5.1 percent in thefourth quarter of 2006. 0.06 3 0.1810. HPs non-U.S. net revenue rose from $56.1 billion in

2005 to 59.4 billion in 2006.0.06 4 0.24

Weaknesses1. HPs worldwide midrange server market share decreased

21.3 percent in 2006.0.09 1 0.09

2. HP ceded 100 basis points of server market share, to26.8 percent.

0.06 2 0.12

3. Local labor conditions and regulations 0.01 2 0.024. HPs return on equity is 18.55 percent, while the return

in equity of the industry leader in return on equity is38.93 percent.

0.06 1 0.06

5. Managing a geographically dispersed workforce 0.01 2 0.026. HPs long-term debt/equity is 0.233, while the long-termdebt/equity of the industry leader in long-termdebt/equity is 1.689.

0.03 1 0.03

7. HPs server vendor market share dropped from 26.9percent in 2005 to 26.8 percent in 2006.

0.01 1 0.01

8. Over 60 percent of overall net revenue in 2006 camefrom outside of the U.S.

0.08 1 0.08

9. Longer accounts receivable cycles 0.02 2 0.0210. HPs long-term growth rate (5 yrs) is 13.82 percent,

while the long-term growth rate of the industry leader inlong-term growth is 22.62 percent.

0.05 1 0.05

TOTAL 1.00 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

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.


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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

1. 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).

G. SPACE Matrix

6

5

4

3

2

1

-6 -5 -4 -3 -2 -1 1 2 3 4 5 6

-1

-2

-3

-4

-5

-6

Competitive

IS

ES

CA

FS

Conservative Aggressive

Defensive

Return on Assets (ROA) 5 Rate of Inflation -3

Leverage 6 Technological Changes -5

Net Income 6 Price Elasticity of Demand -2

Income/Employee 5 Competitive Pressure -6

Inventory Turnover 6 Barriers to Entry into Market -3

5.6 -3.8Environmental Stability (ES) AverageFinancial Strength (FS) Average

Environmental Stability (ES)Financial Strength (FS)


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

H. Grand Strategy Matrix

Market Share -2 Growth Potential 6

Product Quality -2 Financial Stability 6

Customer Loyalty -3 Ease of Entry into Market 5

Technological know-how -2 Resource Utilization 5

Control over Suppliers and Distributors -2 Profit Potential 6

-2.2 5.6Competitive Advantage (CA) Average Industry Strength (IS) Average

Competitive Advantage (CA) Industry Strength (IS)

Rapid Market Growth

Quadrant II Quadrant I

Strong

Competitive

Position

Slow Market Growth

Weak

Competitive

Position

Quadrant III Quadrant IV


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I. The Internal-External (IE) Matrix

The IFE Total Weighted Score

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

High I II III

3.0 to 3.99

Medium IV V VI

The EFE TotalWeighted Score

2.0 to 2.99

Hewlett- Packard

Low VII VIII IX

1.0 to 1.99

Hold and Maintain

Product Segment Percent RevenuePersonal Systems 49

Imagining & Printing 29

Enterprise Storage Servers 19

Financial Services 2

Software 1


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J. QSPM

Strategic Alternatives

Key Internal Factors WeightIncrease advertisingbudget worldwide

Open 50 HPstores in US

Strengths AS TAS AS TAS

1. HPs unit growth was an impressive 23.8 percent,significantly outpacing the second and third-placevendors

0.07 2 0.14 1 0.07

2. In November 2006, HP completed the acquisitionof Mercury Interactive Corp., a provider ofsoftware and services, for $4.5 billion.

0.08 2 0.16 1 0.08

3. HPs net property, plant, and equipment increasedfrom $6.5 billion in 2005 to $6.9 billion in 2006.

0.04 2 0.08 3 0.12

4. HPs worldwide PC shipments market shareincreased in 2006 to 17 percent from 15.7 percentin 2005.

0.08 4 0.32 2 0.16

5. HP experienced a 8.4 percent increase inworldwide volume server market share.

0.07 4 0.28 2 0.14

6. HPs high-end server revenues increased 2.4percent.

0.04 --- --- --- ---

7. HP remained in the number 1 spot in the fourthquarter of 2006, according to IDC, and gainedmore than 200 basis points of market share on ayear-over-year basis, ending the period at 18.1percent.

0.03 --- --- --- ---

8. In the U.S., HPs market share rose to 24.0 percentfrom 20.6 percent.

0.05 2 0.10 3 0.15

9. HPs server revenue growth was 5.1 percent in thefourth quarter of 2006.

0.06 --- --- --- ---

10. HPs non-U.S. net revenue rose from $56.1 billionin 2005 to 59.4 billion in 2006.

0.06 3 0.18 1 0.06

Weaknesses1. HPs worldwide midrange server market share

decreased 21.3 percent in 2006.0.09 3 0.27 1 0.09

2. HP ceded 100 basis points of server market share,to 26.8 percent.

0.06 3 0.18 1 0.06

3. Local labor conditions and regulations 0.01 --- --- --- ---4. HPs return on equity is 18.55 percent, while the

return in equity of the industry leader in return onequity is 38.93 percent.

0.06 --- --- --- ---

5. Managing a geographically dispersed workforce 0.01 --- --- --- ---6. HPs long-term debt/equity is 0.233, while the

long-term debt/equity of the industry leader inlong-term debt/equity is 1.689.

0.03 2 0.06 4 0.12

7. HPs server vendor market share dropped from26.9 percent in 2005 to 26.8 percent in 2006.

0.01 --- --- --- ---

8. Over 60 percent of overall net revenue in 2006came from outside of the U.S.

0.08 4 0.32 1 0.08

9. Longer accounts receivable cycles 0.02 --- --- --- ---10. HPs long-term growth rate (5 yrs) is 13.82

percent, while the long-term growth rate of theindustry leader in long-term growth is 22.62percent.

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


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SUBTOTAL 1.00 2.09 1.13

Key External Factors WeightIncrease advertisingbudget worldwide

Open 50 HPstores in US

Opportunities AS TAS AS TAS1. The worldwide personal computer industry posted its

fourth consecutive year of double digit expansion in2006, recording 10 percent unit growth.

0.07 4 0.28 2 0.14

2. PC shipments in the Asia-Pacific region expanded byan estimated 17.6 percent in 2006 on a unit basis.

0.06 4 0.24 1 0.06

3. IDCs rest of the world category, which includesEastern Europe, Latin America, and the Middle Eastrose 22 percent on a preliminary basis.

0.05 4 0.20 1 0.05

4. It is estimated that the PC industry will post total unitgrowth of approximately 11 percent for 2007.

0.08 2 0.16 4 0.32

5. Dells units sold declined 8.4 percent, so Dellsmarket share fell by nearly 300 basis points on ayear-over-year basis.

0.07 --- --- --- ---

6. Over the past three years, Gateways gross marginsnarrowed from 14.4 percent in the first quarter of2004 to 5.2 percent in the fourth quarter of 2006

0.07 --- --- --- ---

7. During the fourth quarter of 2006, server marketrevenue grew by 5.2 percent.

0.06 --- --- --- ---

8. Dell achieved server market share of 9.4 percent onserver revenue growth of 2.4 percent, down from 9.6percent

0.04 --- --- --- ---

9. Worldwide revenues for servers were up 2.0 percentto $52.3 billion.

0.05 4 0.20 1 0.05

10. In the first quarter of 2006, IBMs server revenuegrowth of 3.8 percent put its market share at 37.9percent, down from 38.4 percent the comparableyear-earlier quarter.

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

Threats1. IBM maintained its position as the leader in overall

server market revenues in 2006.0.09 2 0.18 3 0.27

2. PC unit shipments in the U.S. declined 0.5 percent inthe fourth quarter of 2006.

0.01 2 0.02 4 0.04

3. During the fourth quarter of 2006, Apple grew itsunits by 31.8 percent in the U.S. market.

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

4. Suns server market share was 9.7 percent in thefourth quarter of 2006, up from 8.2 percent a yearearlier.

0.04 --- --- --- ---

5. Apples switch in 2006 to Intel-based chips increasedthe processing power of Macs.

0.02 --- --- --- ---

6. IBMs server factory revenues increased 0.8 percent. 0.02 --- --- --- ---7. Sun Microsystemss server factory revenues

increased 11.2 percent.0.03 --- --- --- ---

8. Apples improvement in the U.S. market share from3.3 percent in 2004 to 4.0 percent in 2005, and thento 4.2 percent in 2006.

0.03 --- --- --- ---

9. IBMs high-end sever market share rose to 57.2percent from 53.6 percent as revenues improved by6.6 percent.

0.07 --- --- ---


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10. Sun Microsystemss low-end server market shareexpanded 60 basis points to 8.2 percent.

0.04 --- --- --- ---

SUBTOTAL 1.28 0.93

SUM TOTAL ATTRACTIVENESS SCORE 3.37 2.06

K. Recommendations

The QSPM strategies assessed whether increasing the advertising budget by $400 millionor opening 50 Hewlett Packard stores was the better alternative. The QSPM revealedincreasing 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 $250million.

L. EPS/EBIT Analysis

$ Amount Needed: 650MStock Price: $43Tax Rate: 35%Interest Rate: 5%# Shares Outstanding: 2,550M

Recession Normal Boom Recession Normal Boom

EBIT 2,000,000,000 8,000,000,000 12,000,000,000 2,000,000,000 8,000,000,000 12,000,000,000

Interest 0 0 0 32,500,000 32,500,000 32,500,000

EBT 2,000,000,000 8,000,000,000 12,000,000,000 1,967,500,000 7,967,500,000 11,967,500,000

Taxes 700,000,000 2,800,000,000 4,200,000,000 688,625,000 2,788,625,000 4,188,625,000

EAT 1,300,000,000 5,200,000,000 7,800,000,000 1,278,875,000 5,178,875,000 7,778,875,000

# Shares 2,515,116,279 2,515,116,279 2,515,116,279 2,500,000,000 2,500,000,000 2,500,000,000

EPS 0.52 2.07 3.10 0.51 2.07 3.11

Common Stock Financing Debt Financing

70 Percent Stock - 30 Percent Debt 70 Percent Debt - 30 Percent Stock

Recession Normal Boom Recession Normal Boom

EBIT 2,000,000,000 8,000,000,000 12,000,000,000 2,000,000,000 8,000,000,000 12,000,000,000

Interest 9,750,000 9,750,000 9,750,000 22,750,000 22,750,000 22,750,000

EBT 1,990,250,000 7,990,250,000 11,990,250,000 1,977,250,000 7,977,250,000 11,977,250,000

Taxes 696,587,500 2,796,587,500 4,196,587,500 692,037,500 2,792,037,500 4,192,037,500

EAT 1,293,662,500 5,193,662,500 7,793,662,500 1,285,212,500 5,185,212,500 7,785,212,500

# Shares 2,510,581,395 2,510,581,395 2,510,581,395 2,504,534,884 2,504,534,884 2,504,534,884

EPS 0.52 2.07 3.10 0.51 2.07 3.11


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M. Epilogue

On January 31, 2008, HP unveiled at the Photo Marketing Association (PMA) tradeshowseveral retail photo printing solutions and services that provide consumers with tools topersonalize their photos and publish customized creative output. With three major

analog-to-digital conversion processes already underwayin film, telephony and TVand as more analog processes such as book publishing are converted to digital, thegrowth of digital content is exploding. According to industry analyst firm IDC, theinformation added annually to the digital universe is expected to increase more than600% from 161 billion gigabytes to 988 billion gigabytes between 2006 and 2010. In2006 alone, the amount of digital information created, captured and replicated wasapproximately 3 million times the information in all the books ever written. This is amajor opportunity for HP. Put simply, we want our customers to be able to bring richcontent to life, said David Murphy, senior vice president, Web Services and SoftwareBusiness, HP. In combining our printing franchise with a world-class set of software andweb assets, HP is creating a multibillion-dollar business poised to lead the transformation

to a comprehensive digital supply chainfrom content creation and management topublishing and consumption. Nowhere is the disconnect between digital content creationand publishing more prevalent than in the digital photography market, where thedifference between the number of images captured and those that are actually publishedor printed is vast and growing. To bridge this gap, HP now offers the new HP PhotoCenter to personalize their photos and publish customized creative content. In the retailphoto environment, the company is working to transform retailers traditional photo labsinto digital publishing centers that move beyond prints to rich digital media, such asphoto 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 Centersnationwide. 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 twosizes16 x 20 inches and 20 x 30 inches. Customers will have the choice of using asingle image or creating a collage of up to 30 images, and they can add a title as well asselect from up to 14 background colors. Between 2004 and 2007, the web-to-retailmarket 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 sitesgenerated 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 compensationof $26 million for the 2007 fiscal year, reflecting the board's satisfaction with HP'saggressive sales growth and cost-cutting moves. Hurd, 51, took home $1.4 million inbase salary, another $1.4 million in bonus money and nearly $12 million in cash incentivepayouts. 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


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the company beat its financial targets in all business segments in 2007, despite aggressivegoals set by the board after an especially prosperous period the year before. In nearlythree years as CEO, Hurd has guided HP to a number of significant milestones, includingrecapturing the title of world's biggest PC seller from rival Dell Inc. and cracking $100billion 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 datacenters and corporate offices and aggressively slashed nearly 15,000 jobs in a massiverestructuring launched shortly after Hurd's arrival as CEO and completed in October2007. Some 3,000 more employees left the company as part of an early retirementprogram that HP initiated last year. Since Hurd took the reins of HP in April 2005, thecompany's stock price has more than doubled, from around $20 to more than $40 today, arise that has created more than $50 billion in additional shareholder wealth.

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 improvedreliability, and the Compaq dc5800 Business PC include a variety of environmentally-friendly features that allow them to qualify for the Electronic Product EnvironmentalAssessment Tool (EPEAT) Gold registry. The EPEAT registry helps businesses evaluateand select technology products based on their environmental attributes. Priced at $1258,the dc7800 Ultra-slim Desktop PC's solid-state hard drive provides near instantaneousaccess to data and eliminates moving parts, which are the main cause ofelectromechanical wear. It also offers a faster system start, better reliability, improvedpower efficiency, shock improvement and a smaller overall footprint. Starting as low as$579, the dc5800 Business Desktop PC, available in redesigned small form factor andmicrotower PC designs, offers a range of productivity tools and security features. "HP'songoing efforts to design for the environment have spanned decades," Alan Reed, vicepresident and general manager of personal systems group at HP, said in a statement.

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DavidEd12CaseStudy07HewlettPackard