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HP has made the bizarre decision to try to forfeit its position as the world's largest PC maker.  (Source: AP)

New CEO Léo Apotheker is trying yet again to outdo IBM and Oracle, something he failed at with his previous employer.  (Source: Reuters)

HP killed its webOS TouchPad tablet after only a month on the market.  (Source: HP)
"I didn't know there was such a thing as corporate suicide, but now we know that there is."

Tom Perkins knows a thing or two about Hewlett-Packard Comp. (HPQ).  Mr. Perkins worked as the head of research at HP and served three years on the company's board of directors, including serving as the board's director in 2006.  Despite resigning from that position as an ethical protest against the company's decision to spy on the phone records of his fellow board members to ferret out leaks to journalists (Mr. Perkins was never implicated in these leaks, but was upset about what he felt were unethical tactics by HP), he has remained very interested in the company.

I. HP's Baffling Direction

When it comes to new CEO Léo Apotheker plan to exit the consumer electronics market [
1][2], he's unequivocal -- "I didn't know there was such a thing as corporate suicide, but now we know that there is.  It's just astonishing."

HP's stock has sunk approximately 44 percent since July 2011.

Other electronics industry figures share Mr. Perkins' dismay at HP's implosion.  Comments one executive to The New York Times, "H.P. was the epicenter of Silicon Valley, geographically, culturally and historically. Is there any analogy for an institution so respected that has fallen so far so fast? I can’t think of one."

The electronics giant's decision to pick Mr. Apotheker 
baffled many as he had virtually no hardware experience.  Further, while CEO at German enterprise software giant SAP AG (ETR:SAP) his company was implicated in a plot to steal Oracle Corp.'s (ORCL) software, which ended up costing it $1.3B USD.  To make matters worse, under his tenure SAP failed to gain ground in the enterprise software market on International Business Machines, Inc. (IBM) and Oracle -- in fact, SAP had dropped him for this.

More amazing than his appointment, though, has been the willingness of the board and fellow executives to support Mr. Apotheker in retrying the same tactic that failed him at SAP -- an all-out push into enterprise software in an attempt to rival Oracle and IBM.

It's somewhat understandable why the board might back such a plan.  The enterprise software market has much higher profit margins than HP's consumer hardware market, and HP already has a decent foothold in this tempting marketplace.  But as Mr. Apotheker's own history shows, gaining market share in the cutthroat realm of business software sounds a lot easier on paper than it is in practice.

The board's willingness is even easier to understand, however, when you consider that Mr. Apotheker supervised a committee to appoint five new board members, a move that was blasted by the shareholder watchdog group Institutional Shareholder Services.  (Mr. Apotheker serves as director of HP's 14-member board.

II. Company Looks to Quit What It's Best At

While the friendly board has his back, analysts and fellow executives are appalled at 
HP's enormous bid for enterprise software firm Autonomy Corporation Plc. (LON:AU).  HP is offering $11.7B USD -- 11 times the Autonomy's annual revenue.  An executive comments, "Autonomy had been shopped everywhere. No one would pay 11 times revenue.""

A. M. Sacconaghi Jr., Bernstein Research’s senior analyst, commented, "It's a fantastically high price. It’s a very poor capital allocation decision. From our perspective, it's value-destroying."

HP's decision to kill its TouchPad project after only a month on the market and to ditch its steady consumer PC base -- which is 
number one in global and U.S. sales -- prompted an inglorious comparison from one executive.  They remark, "It was as if Alan Mulally left Boeing to join Ford as C.E.O., and announced six months later that Ford would be making airplane." (Instead, Mr. Mulally -- CEO of Boeing from 2001-2006 -- stuck with Ford's expertise -- making automobiles.)

III. Downhill Slide Started With Mark Hurd's Exit

The wild ride for HP began in 2010 when CEO Mark Hurd, a respected leader, was caught allegedly obfuscating from the board 
a relationship with a contractor (who happened to be a former adult actress to boot) and the ensuing sexual harassment suit.  Despite his steady performance at HP, the board wasted no time in giving Mr. Hurd the boot.  People close to the decision recall one board member telling Mr. Hurd, "We don’t need you."

Two board members actively resisted the ouster, but were overruled.  They resigned in protest.

Meanwhile Mr. Hurd 
jumped shipped to Oracle, which was headed by his long-time friend Larry Ellison.  Serving as one of two co-presidents, Mr. Hurd now appears to have a bright future at the wildly successful enterprise computing giant.

Mr. Ellison admonished HP for letting their veteran leader go, stating, "The H.P. board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago. That decision nearly destroyed Apple and would have if Steve hadn’t come back and saved them."

The statement, which at the time was dismissed as simply more brash remarks from the outspoken CEO, now seems somewhat prophetic.  

Some hold out hope that HP will see the light and decline dropping its "slow-growth"/"low margin" businesses.  States Mr. Sacconaghi, "[HP is] not rotten at the core. It's in a series of businesses with strong competitive positions albeit in slow-growth markets. It's the single cheapest technology stock in the S.& P. 500. At some point something has to go right: improved performance, successful spinouts or a change in leadership."

In other words HP may be near the edge, but it hasn't driven off quite yet.



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RE: Dammit!
By nikon133 on 8/29/2011 7:03:06 PM , Rating: 5
Agree.

Getting rid of Hurd was huge mistake... but taking in previously sacked guy with very poor results and no experience in computer hardware?

It really looks like some very shady enterprise. Also overpaying that software company? First thing that run through my mind was just how much of that money will return to "Pharmacist" guy and his jolly board mates?


RE: Dammit!
By Samus on 8/29/2011 7:10:39 PM , Rating: 1
The irony is that HP actually does make as good or better hardware than most of the competition these days. They clearly want to sell their business for premium yaun while it is riding the high note.

Lenovo has disgraced the ThinkPad name, even the high-end have chronic quality control problems. Just search for T400/T500 USB ports breaking, or the X201 LCD screen failures. Those problems never existed under IBM's reign. I know, because I STILL have an X40 with an SSD running Windows 7. It was manufactured in 2001 and the only failure was the hard disk after 7 years!

Any frankly everyone else, Acer, Toshiba, even Dell, have failed to offer reliable mainstream devices over the years.

Axing Mark Hurd was the beginning of corporate suicide. Axing the TouchPad, stabbing Palm in the back, and selling your thriving PC business to the Chinese (we all know thats where this is going) are just a few of the many nails in the coffin.


RE: Dammit!
By tastyratz on 8/30/2011 9:53:24 AM , Rating: 3
hp does NOT make as good or better hardware these days. They in fact make WORSE hardware. I am not going off opinion, but by the square trade laptop reliability report based on returns vs warranties issued
Read for yourself
http://www.squaretrade.com/htm/pdf/SquareTrade_lap...


RE: Dammit!
By atlmann10 on 8/30/2011 10:05:43 AM , Rating: 2
The funny thing is that the reason they have more returns is because they sell percentage wise so much more than any of there competition that the equipment amount branded by them is more. The internal components on everything from APPLE to HP to DELL to ACER is made by a relatively small amount of providers. All the internal components on every machine are therefore relatively the same. The only real difference is there appearance externally and of course there brand name.


RE: Dammit!
By tastyratz on 8/30/2011 11:08:20 AM , Rating: 3
actually that number is based on a percentage of returns against a total number of warranties sold, not total number of machines sold. The statistics there are that 23 out of every standard 100 laptops sold experience a hardware failure, not that 23 fail...


RE: Dammit!
By Phoque on 8/30/2011 8:30:49 PM , Rating: 3
I was surprised at the previous comments too. I had seen the same report as you claiming HP is the worse.

I'd like to see these other people saying HP is the best post some studies/statistics to prove their say, not just their personal experience.

I believe the difference between brand is not as big for premium laptop though.

Anyway, after reading that report, I decided to purchase a premium laptop and stay away from the worst brands.


RE: Dammit!
By TheDoc9 on 8/31/2011 10:28:03 AM , Rating: 2
lol, that's an advertisement for the square trade warranty service! Really that's not valid information and it's totally biased.


RE: Dammit!
By tastyratz on 8/31/2011 12:30:46 PM , Rating: 2
biased how? Square trade does not sell warranties with brand centric pricing. They are in the truth business here because more people will buy laptops that result in fewer claims as a result of their report. More people will also more likely buy warranties after seeing the figures, and square trade will see lower sales of higher risk warranties. Fudging the numbers here will not net them financial gain.

I can also say from a friend who runs a pc repair company and has processed about 2000 machines so far, he concur's with the results and his findings. This should be taken with a grain of salt mind you though because it has no direct metric and is only observed trending.


RE: Dammit!
By mindless1 on 9/1/2011 10:08:09 PM , Rating: 2
You need to look beyond the raw numbers and consider who buys what. The average Joe Sixpack hasn't even heard of Asus, sees Toshiba as some "japanese company", and isn't going to fork over the extra dough for a Sony or Apple product.

Lenovo is quite popular in the business sector but for end user purchases there's mainly HP, Dell, and Acer to a lesser extent.

The point is, less technically savvy people are more likely to break technology based products.

Personally, I wouldn't rate HP best or worst, their lowest end laptops are pretty poorly engineered for durability, and there was that nVidia overheating fiasco a couple (?) years back which was really due to not enough heatsinking of the chip, NOT solder bump formulation which would never have mattered if the chips weren't getting so hot, but otherwise you have to consider that HP sells more low-end laptops than most of the others and you just can't engineer in as much durability with a low budget to work with unless you just make it thick as a brick and very heavy, both of which prospective buyers dislike for the obvious reasons.


RE: Dammit!
By Wolfpup on 9/4/2011 8:28:33 AM , Rating: 2
YIKES. It seemed stupid to give up on WebOS after basically a month. It still has a shot, and is still the best in a lot of ways, and the stakes are HUGE.

That seemed questionable, at best.

But leaving the consumer market?

It's good to finally find out what's really going on.

I just don't understand how these people manage to scam so many people. I mean half the people on the floor of Best Buy would run HP better than this idiot, yet he's doubtless making millions a year...for dismantling the company randomly.


RE: Dammit!
By Chadder007 on 8/30/2011 9:30:48 AM , Rating: 2
Its like someone from the inside got the new CEO hired to take down HP with such an insane decisions.


RE: Dammit!
By wvh on 8/30/2011 6:43:31 PM , Rating: 3
Just like Nokia – suicide by CEO. Seems to be a new trend these days...


RE: Dammit!
By johnsmith9875 on 9/16/2011 12:45:08 PM , Rating: 2
Not really a suicide, more like a murder, and the CEO gets away with the crime.


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