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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 retrospooty on 8/29/2011 9:21:23 PM , Rating: 4
Your personal experience aside, actually Dell has the worst failure rate of major OEM's. HP is fairly good, somewhere near, but not at the top. The top 5 best quality (with regards to hardware failure rates as of 2010/2011 are
1. Lenovo
2. Asus
3. Toshiba
4. Apple
5. HP

RE: Dammit!
By chemist1 on 8/29/2011 10:22:42 PM , Rating: 5
Since you didn't supply the source (something that should be done in any case, for proper attribution), you ranking is not meaningful. According to Consumer Reports' survey of 26,000 members who bought laptops between 2008 and 2011, here are the percent of units for which repairs or serious problems were reported, sorted by mfr. According to CR, differences of less than 3 percentage points are not meaningful, so essentially all scored comparably:
1. Apple, 9%
2. Acer, 10%
3. Toshiba, 10%
4. Lenovo, 11%
5. Gateway, 11%
6. HP, 11%
7. Sony, 12%
8. Compaq, 12%
9. Dell, 12%

RE: Dammit!
By chemist1 on 8/30/2011 3:12:29 AM , Rating: 4
Edit: meant to type "...*your* ranking..."
Also, upon re-reading, I see I came off too harshly--so what I should have instead written was: "It's not possible to understand what such a ranking means without knowing its source." My apologies.

RE: Dammit!
By retrospooty on 8/30/2011 9:22:12 AM , Rating: 2
Source = the RLA (Reverse Logistics Association). I work in RL so I have seen the true info.

The numbers are taken from actual RMA's so no spin is involved that favor anyone. Certain manufacturers like to hide thier defects for obvious reasons.

RE: Dammit!
By retrospooty on 8/30/2011 9:30:45 AM , Rating: 2
I should have added, the defects are taken from hardware returns only. Not things like hard drive or battery failure where the users usually gets a replacement in the mail for a laptop. This makes it a good measurement because any OEM can buy a bad hard drive and it shouldnt count against them if it fails. In other words your Dell hard drive dies after 4 months, and you need it replaced. Is it Dell's fault? No, they buy the same stuff everyone does. WD, Seagate, Samsung, and Hitachi deskstar (purchased from IBM) are about the only large HDD makers left.

Anyhow, with all that said, Lenovo is really doing fantastic work these days. Their quality is easiliy the best in the business.

RE: Dammit!
By tastyratz on 8/30/2011 9:56:25 AM , Rating: 3
I just replied to another post with this link, but I would like to counter your consumer reports statistics with those of squaretrade based on warranties sold vs claims made broken down to manufacturer and laptop type

according to that the numbers are VASTLY different. Lenovo is doing... ok...sorta... in the middle

RE: Dammit!
By retrospooty on 8/30/2011 2:14:37 PM , Rating: 2
I didnt post CR. As I mentioned its easy to manipulate data with sample sizes and time discrepancies to suit the needs of your business, for example Squaretrade may have more to gain by leaning toward one company or another. CR had a 36,000 unit sample, Squaretrade had a 30,000 sample. Reverse logistics tracks returns... not a subset, ALL returns. Lenovo is on top, by a good margin.

RE: Dammit!
By Samus on 8/30/2011 3:37:46 AM , Rating: 3
The CR report, like all CR reports, are flawed. This one in particular has no statistical ratio, meaning they have no control set of averages in relation to the marketplace.

So we're use the fair avereage marketshare as an avereage of products sold to avereage of failures:

Apple portable sales for Q2/2011: 13.6 million units, 83% of them iPads, so 2.7 million Macbook/Macbook Pro's sold. This research does not include iPhones, iPods, or the like.

HP portable sales for Q2/2011: 9.7 million units, <1% of them TouchPads. This includes Pavilion, Probook, Elitebook, etc.

HP sells over 3 times the volume of mobile hardware than Apples sells of Macbook/Macbook Pro's...

That makes HP's failure rate about 3% in comparison to Apple, or roughly a third the number of failures, and unquestionably the lowest in the industry according to Consumer Report.

I know this is a ridiculously unrealistic conclusion, but hey, just taking your data and fixing it for you. Here's my sources: (see graph)

RE: Dammit!
By Samus on 8/30/2011 3:46:11 AM , Rating: 2
Wow, go firefox spellcheck. It changed all my spelling to mistakes!

RE: Dammit!
By Solandri on 8/30/2011 4:24:23 AM , Rating: 2
The CR report, like all CR reports, are flawed. This one in particular has no statistical ratio, meaning they have no control set of averages in relation to the marketplace.

The percentages he gave were the ratio. CR surveys its subscribers, asks them if they own a particular brand item, and if they've had problems with it. So the percentages he gave are the ratio of owners reporting problems to owners reporting no problems.

They didn't give raw numbers, but that's easy to back out from the 3% margin of error. That would mean the manufacturer with the fewest number of responses got about 1100 data points.

Where CR's surveys are flawed is in that they're self-selected - each subscriber gets to decide whether or not to respond to a survey. It's not random. If people who like to rave about how great the products they use are tend to buy one brand (e.g. Apple), a disproportionately large number of those respondents will report no problems. If the people who like to complain about the products they use tend to buy another brand, a disproportionately large number of those respondents will be negative. (I subscribe, and get these survey requests every now and then. Not everyone gets to participate - they randomly select you and ask for your input. So they are trying to control this factor somewhat, by comparing brand ownership with chance to respond.)

Another thing to keep in mind is that Apple only has one line of computers. Dell and HP have both business and home lines. If you've used both, it's pretty obvious the HP and Dell business computers are much better built than their home computers. A magazine like Consumer Reports is going to mostly reflect the quality of home line purchases from Dell and HP.

RE: Dammit!
By chemist1 on 8/30/2011 7:22:15 PM , Rating: 2
Yes, exactly.

RE: Dammit!
By atlmann10 on 8/30/2011 9:51:55 AM , Rating: 2
ROFL the funniest part of all of these numbers is that the reason the percentages are pretty much exactly the same no matter the brand is they are all made from generally the same hardware no matter the brand no matter what people think of the brand!

"What would I do? I'd shut it down and give the money back to the shareholders." -- Michael Dell, after being asked what to do with Apple Computer in 1997
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