Why HP Can't Cut Its Way to Growth

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HP watchers expect the CEO search to go quickly, noting that Hurd was named Carly Fiorina's successor less than seven weeks after the board fired her in February 2005. If history repeats itself, HP could introduce a new CEO by Sept. 28, when it's slated to hold its annual gathering for investors.

Todd Bradley, head of the PC unit, and former EMC (EMC) executive Dave Donatelli, who joined HP last year to run the server, storage, and networking division, are among the insiders seen as likely candidates. But HP is just as likely to look to an outsider, as it did when it picked Hurd, former CEO of ATM maker NCR (NCR). "Mark Hurd's shoes will be tough to fill," says analyst Shaw Wu of Kaufman Bros. "In terms of what Cathie needs to do, it's really about staying the course and trying to keep HP employees focused on what they need to do."

Retaining Managers

If anyone knows how things work at HP, it's Lesjak, who has spent almost half her life there. Before being named CFO, the University of California at Berkeley MBA grad oversaw HP's cash, debt, and foreign currency holdings.

Barclays Capital (BCS) analyst Ben Reitzes says that since Lesjak, who has a deep understanding of HP's costs, will return to her CFO role, HP's board can recruit a tech industry veteran more concerned with growth. In the meantime, he's counting on her to keep HP's business leaders—Bradley, Donatelli, printer chief Vyomesh Joshi, and Ann Livermore, head of the enterprise business group—motivated and happy to remain part of Team HP. "HP is not a one-man show," Reitzes says. Those managers "need to be retained in order to keep HP running smoothly."

Lesjak has been singing that tune to Wall Street and HP's more than 300,000 workers. "One thing changed in this company on Friday, and that is our CEO left," she said during an Aug. 8 conference call. "Our management breadth and depth in the company is as strong as it's ever been."

The bottom line: HP's interim CEO, Cathie Lesjak, is known for cutting costs. Analysts say the company needs a future CEO focused on growth.

Guglielmo is a reporter for Bloomberg News. With Rochelle Garner in San Francisco.

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