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docdivakar
Sad, Sad, Sad! Great company with not so great leadership lately! Fiorina's ...
wilber_xbox
Rather than following the path of other companies, HP should carve their own ...
Viewpoint: Why I don't think Leo can save HP
Rick Merritt
8/18/2011 7:40 PM EDT
SAN JOSE, Calif. – I understand Leo Apotheker's vision for Hewlett-Packard, but I don't believe he can execute on it. HP's woes are broad and deep, and the new CEO's methods are at best clumsy and arguably incompetent.
By announcing HP will take the next year or so to discuss what to do with its PC business, Apotheker will drive customers to Acer, Dell and Lenovo—and drive down the price anyone would pay for HP's $41 billion PC group.
It's hard to think of anyone who might want to buy the world's leading PC business given its razor thin margins. What's worse, that client business has zero position in the hot mobile markets of tablets and smartphones now that Apotheker axed HP's WebOS products.
It's even harder to think of who would want to buy the remaining WebOS software group, given Apotheker is admitting he sees no viable product business based on it. If WebOS was not already in last place as a mobile platform, it is now.
I fail to understand why HP did not opt to explore possible PC and WebOS deals quietly before announcing to the market it believes both are of questionable value. I am no fan of the new HP tablets and smartphones, but axing the WebOS products after two months on the market may set a new record for corporate impatience.
In a conference call, Apotheker talks about managing the PC and WebOS businesses "in a very normal way" while HP explores its options. "I am sure we can manage through whatever distractions there are and continue to deliver great products," he said.
Bull.
HP is victim of too many CEOs. Carly Fiorina bought Compaq to get PC volumes up. Mark Hurd bought Palm for $1.2 billion just 18 months ago to create a mobile client strategy.
Now Apotheker, the former SAP CEO, decides client computing is a hot potato, and drives the company to a server software strategy. HP employees should sue for whiplash.
Unfortunately HP's woes are not limited to PCs and WebOS. It's services business has failed to live up to the promise of its massive acquisition of EDS, so today Apotheker also appointed a new and largely unknown head of that unit which he says now faces an 18-month transition period.
On another front, Oracle, with Mark Hurd now sharing the helm, announced it will stop supporting Itanium with its database software. The move helped drive down sales of HP's Itanium servers by nine percent in the latest quarter.
Even printers are facing significant "headwinds" HP reported, in part due to supply chain disruptions after the Japan earthquake.
For relief, Apotheker is turning to a little-known, 15-year-old business applications company called Autonomy Corp. which he aims to acquire for a whopping $10.3 billion. Like most of Apotheker's moves, however, details of the deal are not yet fully baked.
The CEO positions the deal as helping transform HP into a higher margin server and software business. Sounds like Oracle, only the software piece is far less compelling than core database or SAP software.
One analyst was quick to attack the deal as overvalued.
"You are paying close to 11-times the trialing revenue while your stock is at a low," said the analyst on the conference call. Autonomy represents "less than one percent of HP's revenues yet cost 15 percent of its market cap," he noted.
That rustling sound you hear is from disgruntled HP employees printing out their resumes. At this point I don't know what would be worse for HP, suffering through the next two years with Apotheker, or looking for yet another new CEO.
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bolaji.ojo
8/19/2011 12:35 PM EDT
Rick, This was a messy decision executed in a bumbling almost amateurish way. Why announce you may or may not spin off a business of that size and why cut off one of its legs (the tablet PC and OS operation) even while admitting that tablet PCs were hurting PC sales.
It's like Léo Apotheker is acting more like a Trojan horse than a savior for HP. The man in a one-day period injected more uncertainty into HP than any company should be saddled with in several decades. HP had challenges but it is still by far the world's biggest technology company by revenue. It faced headwind growing any part of its business but it is still a profitable operation. The PC business should have been directly spun off with both the printing, tablet PC and OS operations thrown in then Apotheker should have stayed behind to manage the software operation.
The man's background is in software: that's what he knew and he should have stuck to that -- and not take the HP job.
There's still time to save HP from this blundering mess. The board of directors need to get rid of Apotheker, announce they've decided to remain in PC after conducting the strategic review and hunker down to compete as hard as they can in the market. The alternative is to spin off the PSG business as noted above. I don't buy the "bet on the future" hype. This CEO needs to find another job.
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goafrit
8/19/2011 4:19 PM EDT
Excellent point.He knows nothing about hardware and wants to go back to his basis which is software. Unfortunately, he will expose HP when Oracle is getting to into hardware business. HP should be careful before they become another failed empire.
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rick.merritt
8/19/2011 1:10 PM EDT
Amen, Bola.
BTW the PC business does also serve HP's business customers, and the printer biz has a big consumer retail market--so there are no clear lines Apotheker can draw between commercial/consumer and PC/printer businesses.
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Charles.Desassure
8/19/2011 4:12 PM EDT
Thanks for this article. I strongly agree that the direction of HP and the decisions that the management team are making is foolish, untimely, and unnecessary. I believe that HP sales will drop over the next year. It is very hard to stop that money losing ball from falling once it starts. I am very disappointed with HP management team decisions lately. Sorry, it is time for a new leader.
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patrick_yu
8/19/2011 5:43 PM EDT
If a captain of a ship can make such foolish, untimely, and unnecessary decision, it probably take more than just the leadership change to right the course
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seaEE
8/21/2011 1:17 PM EDT
It is an interesting question. A company that starts out in test and measurement, goes on to create LEDs, communication chips, calculators, printers, pc's, and tablets--could this level of devlopment have gone on fever, given the appropriate level of management? Are there other less scrutinized foibles and pitfalls that cause a company lose its focus in each area--shakespearean drama, but at a corporate level? At some point does the act of trying to keep too many plates spinning all at once, while adding in new plates expose one to more agile, smaller companies?
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seaEE
8/21/2011 1:18 PM EDT
development, forever...yikes, get me to a spellchecker!
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BicycleBill
8/21/2011 6:39 PM EDT
Not sure to what extent the present HP is in the hardware business at all--they are really a marketing/sales compnay, IMO. Do they actually design that PC themselves--or do they specify what they want their PC product to do, and the price point,and have their "partner" design and build it for them?
If the latter, they will be just another "just software and services" vendor soon; whereas a real "hardware" company has genuine internal expertise plus barriers to entry for others. Think about all the great electronics companies htat slowly became nothing more than hollowed-out marketing nameplates, as they morphed themselves out of existence as real consumer products designers/suppliers: RCA, Magnavox,Westinghouse, the list goes on and on (add your own to the list)
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elPresidente
8/22/2011 1:02 AM EDT
HP makes and DESIGNS some of the best server blades out there. Their computers (laptop and PC) are among the best performers for a nameplate brand. Read that as a WORKSTATIONS. Printers are good stuff as well.[br] Yeah, they failed to get into a flash in the pan market - the iPad. Those iDiots are now equipping them with KEYBOARDS...LOL, now it's a netbook, something HP did very nicely with the Mini.
[br] The vultures of Wall St are circling to take a good company apart, nothing more. Nothing has changed except for Chicken Littles screaming for evil purposes.
[br]HP made a marketing 101 mistake with Apple. So what? Fire those marketers and execs and get on with business.
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elPresidente
8/22/2011 1:03 AM EDT
How do you do a paragraph break on this infernal thing?
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agk
8/22/2011 7:44 AM EDT
HP is well known for its quality products. The prices of their laptops are higher when compared to other brands. In spite of that there are users of the brand HP. So i feel they need more advertisement of their products rather than stopping it.Good media is television channels.
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wilber_xbox
8/24/2011 6:56 AM EDT
Rather than following the path of other companies, HP should carve their own path. Even in the marginal profit PC business, HP is doing good. Consumers have good confidence in its hardware.
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docdivakar
8/25/2011 8:05 PM EDT
Sad, Sad, Sad! Great company with not so great leadership lately! Fiorina's fiascos, Hurd's hurdles, and now, Leo's lemmings (of what used to be good PC's, laptops, etc!) Pun aside, it used to good to work with HP's hardware, many of which may soon be extinct!
I wonder if the leadership truly understands the company's core competencies, people and culture. All three cited above seem to have attempted to force-fit their 'culture' into that of HP's.
MP Divakar
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