At a time when several other companies have drastically reduced their top executive and CEO compensations, Hewlett-Packard (HPQ) has paid $24.0 million as compensation for fiscal year 2009 to CEO Mark Hurd. As per company records, this is a 30% reduction from the prior year figure.

The main reason for the reduction is a much lower bonus for 2009, as the technology major went through a tough year, with companies lowering their IT spending budgets to drastically lower levels. Hurd received a salary of $1.3 million, down from his $1.5 million salary the year before. He received a sizeable cash bonus of $14.6 million, which has reduced by $4.0 million from the prior year.

This goes to show that H-P’s ever increasing marketshare, new and innovative product portfolio, efficient management and intelligent business strategy have been beneficial for its employees, motivating them to attain higher standards. Although employees have taken pay cuts, the amount has been minimal compared to other companies.

Although we remain positive on H-P’s performance going forward, given that demand is stabilizing and cyclical businesses (particularly consumer PC) are rebounding, we remain slightly apprehensive about the long-term growth prospects of its printing unit. While the company plans to control costs and generate incremental savings, we think that will take some time.

For the upcoming quarter, the market consensus EPS estimate for H-P is $1.05 a share, exactly the same as the Zacks Consensus Estimate, limiting the chances of any major earnings surprise. This is not unusual for the company, as it had only modest earnings surprises in the last two reported quarters.

Although management expects revenues to decline in the first quarter of 2010, it is upbeat about fiscal year 2010 revenues. We expect H-P to deliver consistent financial results in the coming quarters and we are bullish on the long-term growth prospects of the company.

Zacks Investment Research

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