HP's Hurd confident, despite aggressive moves by rivals

SANTA CLARA, California (Reuters) - Hewlett-Packard Co Chief Executive Mark Hurd expressed confidence in his company's ability to succeed in the computer server market, which has grown more competitive with recent aggressive moves by Cisco Systems Inc and IBM.

IBM is in talks to acquire high-end server maker Sun Microsystems Inc, and Cisco announced this week that it will start to sell servers targeted at data centers.

When asked by a shareholder at the company's annual meeting what an IBM-Sun deal would mean for HP, Hurd said he would not comment on rumors.

However, the CEO said HP's scale and engineering prowess means the company is well-positioned to compete in a server market that now includes Cisco. He also said he expects to continue to partner with Cisco where it makes sense.

"I don't remember a day where the market wasn't competitive ... I think you'll continue to see competition in the market," Hurd told the audience at the meeting in Santa Clara, Calif.

Sources say IBM is in talks to buy Sun, a move that could bolster IBM in the high-end server and software markets.

Repeating statements he made in recent weeks, Hurd said HP is committed to aggressively reducing costs and expects to emerge from the economic downturn as a stronger company. "I couldn't be more confident in the future of HP," he said.

HP is the world's largest maker of personal computers, and the second-largest technology services company, behind IBM. It was also the No. 2 server maker behind Big Blue in the fourth quarter, according to market research firm IDC.

With no major shareholder proposals on tap, the company's annual meeting was fairly brief and straightforward.

When asked during a question-and-answer session about his $42 million bonus last year, Hurd said it was based on HP's success over the prior three years, and said he would not expect it to be as large next year given the difficult economy.

Hurd said earlier this month that he does not expect any improvement in demand for the remainder of the year. In February, HP slashed its fiscal 2009 revenue outlook by more than 10 percent.

HP moved last month to cut employee salaries, with most seeing a 5 percent reduction. Hurd took a 20 percent hit to his base pay.

Shares of Palo, Alto, California,-based HP closed down 76 cents at $28.99.

(Reporting by Gabriel Madway; Editing by Bernard Orr)