Platt has radical answer to HP's problem

Although Hewlett-Packard CEO Lew Platt is reaching retirement age, he is not afraid of change.

If he were, he never would have split his company into two parts, a radical move that analysts say will boost HP's flagging revenue and spur innovation.

The bigger half will keep HP's name and focus on the company's core business - computer hardware, software, printing and imaging.

The smaller, still-unnamed chunk will concentrate on testing and instrumentation products. This area represents only 16% of HP's revenue, some $8 billion in all.

In two weeks, the new HP will reveal plans to offer Internet business services. The services will include "outsourced computation, storage, printing or data mining; business-to-business services such as accounting or procurement; application services such as pay-per-use software and consumer e-services of all kinds," says Platt, who declined to offer further details.

Customers are optimistic.

"We have worked some with HP on Internet services and would definitely be interested in working with them more on e-business, based on our relationship in other areas," says Max Ward, vice president of technology for Staples Office Supply in Framingham, Mass.

Analysts applauded the move to bring focus to HP's computing efforts. "Because HP had so many different business units, every business unit had its own strategy that really didn't tie into other business units' strategies. Everyone was running in a different direction with no clear focus on where to put resources," says Amir Ahari, industry analyst at International Data Corp. in Framingham, Mass.

Platt will step down as CEO in a year to a year and a half. In the meantime, he will be instrumental in refocusing HP, analysts believe.

HP is looking outside and inside the company for a Platt replacement. "For HP to extend the search outside the company is a very radical move. HP needs an aggressive new person to serve as CEO and handle the new company," says Kevin Fong, a former HP employee and now a venture capitalist with the Mayfield Fund in Menlo Park, Calif.

The company may find that person in-house, Fong says. Ann Livermore, vice president of the Enterprise Computing Solutions Organization, has been mentioned as a replacement for Platt. HP confirmed that Livermore is on the short list.