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Sunday, 12 August 2012 13:57

The HP Way has lost its way

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Last week HP announced a record $9 billion quarterly loss. That’s about the amount generated by the Ethiopian economy (population 84 million) during the same period.

HP has become the biggest company in the IT industry since it acquired Compaq ten years ago. Its most recent annual revenues were $127 billion, compared to IBM’s $107 billion. (Remember when IBM was bigger than its five largest rivals combined?)

The last decade has seen a revolving door of high profile CEOs at HP. The Compaq deal was engineered by Carly Fiorina, who saw the company’s stock price halve during the tech crash. She was replaced by NCR’s Mark Hurd, who had a justified reputation as a cost cutter but who also went on an acquisition binge - EDS (2008 - $13 billion), 3Com (2009 – $2.7 billion) and Palm (2010 - $1 billion).

Hurd’s perceived arrogance made many enemies and he was forced out after management irregularities gave his opponents some ammunition with which to shoot him. He was replaced by SAP’s Leo Apotheker, who lasted less than a year before being replaced by Meg Whitman, former head of eBay and high profile political aspirant. Apotheker was a disaster, publicly speculating that HP might get out of the PC business – hardly a comment designed to engender confidence in HP’s customers.

Whitman announced that HP will stay in the PC business, and has merged the PC and printer divisions. The $9 billion loss is from a writedown of the value of HP’s services division – essentially the EDS component acquired by Hurd just three years ago. You can only assume it’s an admission that the acquisition was a mistake.

All in all, it’s a pretty untidy story. I well remember HP in the 1990s. You knew what the company stood for (“The HP Way”), and its products and engineering were solid and well-respected. I remember going to a few HP analysts meetings in the US at that time – the industry was very well disposed towards the company.

HP started the Silicon Valley myth. It was the archetypal company in a garage. It subsequent success was a major factor in moving the epicentre of the US (and world) IT industry from America’s east coast to the west.

The HP Way has lost its way. No-one seems sure what the company stands for, or where it is going. Meg Whitman is talking about a five year turn-around. She is firing staff and reorganising things and trying to make the company leaner and more profitable. All that CEO stuff. When in doubt, reorganise – it least it gives the appearance of action.

Problem is, five years is an eternity in the IT business. We are seeing the emergence of whole new IT paradigms, most notably cloud computing. HP needs to ride the wave, but on current and past performance you would have to be worried about its ability to execute.

The IT industry is littered with the corpses of once great companies. None of them are too big to fail, even HP. Things can change very quickly in this world.

At HP, they will need to.


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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire. He is one of Australia’s longest serving and most experienced IT journalists. He is author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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