CEO Works For Free; HP's "Genius" Revenue Move

Brian.oco 0 Tallied Votes 157 Views Share

Leave it to a Swedish postal worker to restore some credibility to the financial marketplace.

Okay, Lars. G. Nordstrom isn't exactly a postal worker - just the head of the Swedish postal service. He's been at the post since July, and is paid the U.S. equivalent of $110,000 per month for the job (900,000 kronor). Nordstrom is making news by deciding to forego his salary -- he is paid more than 45 Sweden postal workers combined -- and work for free.

No special reason for the decision, Nordstrom says, he just doesn't want people "to think he's greedy", he said to a Swedish newspaper. A caveat: Norsdtrom has already banked millions as the former head of the Swedish banking group Sverige AB.

Another CEO, Mark Hurd at Hewlett-Packard, is in the news but for a more traditional, if not compelling reason. He's engineering a surge at Hewlett-Packard at a time when most computer hardware makers are losing their shirts in a lousy business & consumer market.

I love what he pulled last week, pre-announcing on Tuesday that HP's performance will surpass Wall Street projections.

So what? Well, most CEO's would have waited a week for the actual earnings report to come out (HP delivers its Q4 earnings on Monday afternoon) but not Hurd. He saw the handwriting on the wall and opted
to buck up the company's share price by delivering the good news to Wall Street six days early. And it worked. HP's stock price rose 20% during the week, to $34 per share - even as other big technology companies like Intel, Sun, Yahoo and Google suffer huge stock price declines.

Hurd is fighting an uphill battle at HP, though, and is going to need all the intellectual firepower he can muster to keep HP out in front of a rapidly deteriorating market. Of the $104 billion it made in revenue in 2007, HP made half of that from sales of personal computers, servers and computer storage units. Those items are at the top of the list of computer hardware units that aren't selling. HP is able to maintain some sort of financial stability through its printer ink cartridge business, which seems recession-proof and is contributing almost half of the company's entire operating profit.

That should help, along with the company's recent cost-cutting effort (HP is lopping off 24,000 jobs from its workforce of 320,000 employees over the next three years). Thomas Weisel Partners analyst Doug Reid said in a recent note that he is "incrementally more positive" about HP's shares but added that the severity of the economic downturn isn't fully known and could hurt HP worse than it anticipates. "We continue to see that significant downside risks remain as the full impact of a slowing global economy on HPQ's business remains unclear," Reid wrote. He added that "increased risk that HPQ's cost cutting measures will not keep pace with declining global demand for IT products in" 2009.

HP stock had been trading at about $50 per share before the economic carnage hit in September. It fell to $28 per share in mid-November, before bouncing back up to $34 per share after Hurd's premeditated earnings forecast last Tuesday.

I don't know how many rabbits Hurd has left in his hat. He's proven quite a magician so far, but then again, smoke and mirrors can only take you so far.