

The stock market hates HP's new strategy - pemulis
http://www.google.com/finance?q=nyse+hewlett+packard

======
jedwhite
Apotheker is taking the pain upfront, and undoing the damage wrought by
Fiorina and Hurd over the last decade. He only took over in November 2010, and
had to take some time to look at the business, and give the WebOS launches a
chance. But he's basically unwinding Fiorina's Compaq acquisition (as Michael
Dell implied in his tweet yesterday), and Hurd's Palm/WebOS acquisition. HP
used to have a core value of only being in businesses where it could be at the
leading edge technologically. Tablets, smartphones and PCs are areas where
it's been a copycat. Plus, Apotheker has likely identified as part of his
review since starting (at the end of 2010) that consumer technologies aren't
an area that it has a competitively differentiated core competence. [EDIT for
typos/clarity]

------
ansy
This was perhaps a good plan delivered with the poorest tact. The reality
distortion field seems to be working in reverse for Leo & Co.

Moving toward an enterprise only strategy could make HP healthier and more
profitable in the long run. It may even reap additional benefits from a
consolidation of vision.

The PSG offers less and less synergy with the rest of the company with each
passing year. Especially if WebOS is dead, which everyone knew but nobody
wanted to admit.

The problem is HP could have kept webOS in zombie mode and discretely shopped
around the company under the guise of licensing talks. Maybe HP already did
that and its last option walked out the door.

And the same with the PSG. HP could have kept that under wraps and saved the
news until the transition was nearly complete. "By the way, PSG, the #1 PC
maker in the world, is doing great and we think it will do even better as an
autonomous company which will happen as soon as the SEC allows it starting
from today."

Instead HP delivered an abortion of bad news with little to no concern how it
would be received. It's like Apotheker thought to himself, "this is clearly
the best solution" and therefore it requires absolutely no explanation.
Everyone should just "get it" like he does.

~~~
justincormack
Personally I think that big enterprise software and its sales model, as
perfected by Oracle and SAP is dead long term, it will be killed by an on
demand cloud products. HP maybe had a chance to get into this market
eventually, and WebOS was part of his strategy.

But instead they decided to chase last decades model which makes high margins
in the short term.

And why does no one want to try to compete with Apple?

~~~
Daishiman
> Personally I think that big enterprise software and its sales model, as
> perfected by Oracle and SAP is dead long term, it will be killed by an on
> demand cloud products. HP maybe had a chance to get into this market
> eventually, and WebOS was part of his strategy

It's not going to be the market it once was, but those companies have very,
very good reasons to use enterprise software: they can't rely on no-name cloud
providers for legal and ass-covering reasons, they need the local
installations and control of their infrastructure, and their sales structure
is optimized for dealing with large corporations.

> And why does no one want to try to compete with Apple?

Doing your own hardware is expensive, and getting good margins much more so.
HP hasn't made high-quality hardware in ages, and they can't possibly compete
with Apple or Google's partners in the arena when they have to catch up and
invest even more money than them.

~~~
ghshephard
Interesting perspective - Particularly as I see so much crappy enterprise
software being installed in our company, for pretty much the reason you are
communicating.

But, where does salesforce.com come into play? They seem to be pretty
successful.

If I had to bet - it will be short-term (5-10 years) enterprise software
continues to be successful. But longer term (10 years+) cloud software
demolishes the whole concept of "Local installs and management of every
enterprise software under the sun."

~~~
quanticle
I doubt it. Yeah, it might be technically feasible. But politically? No way.
Corporations are control freaks. I've seen it time and again - as corporations
grow, they require a level of customization that generic third party cloud
providers can't provide and they bring their infrastructure in-house.

------
guelo
Another MBA type killing a great tech company. I don't understand why it
doesn't occur to these boards that engineers/technologists/innovators should
lead tech companies. For some reason they can't imagine that technology can
save a technology company. It wasn't some genius business maneuver that turned
Apple into the biggest company in the world, it was genius technology.

~~~
pemulis
Not to discount the idea that tech companies should be run by innovators, but
Apple wouldn't be one of the biggest companies in the world if not for its
ingenious vertical integration, which ensures that competitors are always a
year or more behind. A few famous examples include the way they temporarily
monopolized the supply of a crucial type of flash memory for iPods, and still
control the entire supply of certain touchscreen sizes for tablets. They
provide the up-front capital to build factories in China to produce these new
technologies in exchange for exclusivity. And after the exclusive period is
over, Apple pays a discounted price, which means that their competitors
actually subsidize Apple's products. There are plenty of other examples of
operational genius within Apple along the same lines. Without those genius
business maneuvers, they would probably be a successful company, but certainly
not the biggest company in the US. The key thing is that this innovation in
business ops is in the service of grand technological vision. Ops without
vision dooms a company in the long term.

~~~
beagle3
I agree with everything you say. And yet, Apple is not run by MBAs or MBA
culture - it is being run by a person whose roots are in technology, liberal
arts, LSD and hare krishna, and is a college dropout.
<http://en.wikipedia.org/wiki/Steve_Jobs#Early_years> is illuminating about
who this person is.

------
rkalla
I think a lot of it has to do with how the decision was... presented?

    
    
      1. HP tablet sales fail.
      2. HP warns of low earnings, then announces them.
      3. Promise to make announcement only after market closes on the 18th.
      4. Rumors that they are spinning Compaq back out.
      5. Changes mind and makes announcement.
      6. They are buying Autonomy (enterprise/IBM space)
      7. They are shooting the mobile device effort in the face.
    

That is... a lot of change to suddenly announce, especially given that the
Palm/WebOS aqusition[1] not more than a year ago was the big new vision for
the company.

They made one product and couldn't sell it[2] and pulled the plug on the
entire vision while at the same time announcing a huge corporate shift.

Busy day for HP.

[1] <http://www.engadget.com/2010/04/28/hp-buys-palm/>

[2] [http://allthingsd.com/20110816/ouchpad-best-buy-sitting-
on-a...](http://allthingsd.com/20110816/ouchpad-best-buy-sitting-on-a-pile-of-
unsold-hp-tablets/)

~~~
camiller
Realize that a different CEO was in charge at HP when the acquisition of Palm
occurred and the new CEO came from an enterprise software company (SAP) and
seems intent on turning HP into a company he knows how to run, rather than
running HP as the company it is. Someone (maybe at precentral.com) likened it
to when a sports team gets a new coach he recruits players for his style of
game instead of building with the talent at hand, AKA "a rebuilding year".

I really, really hope they license WebOS to a good phone manufacture, The only
real problem with the touchpad was underpowered hardware. I read somewhere
that they got WebOS running once on iPad hardware for testing purposes and it
rocked. WebOS on a dual core tablet has the potential to be really cool.

~~~
notatoad
>seems intent on turning HP into a company he knows how to run, rather than
running HP as the company it is.

but what is HP currently? all their consumer-level products are shit. i don't
have any experience with their current enterprise services, but from the way
apotheker is talking i'd assume they have a decent infrastructure in place
there to build upon. their last few CEOs have kind of run their consumer
hardware manufacturing division into the ground, maybe pulling out is the best
thing to do at this point.

~~~
krupan
They have been moving towards enterprise services since Carly. Mark Hurd
bought EDS and Mercury specifically to strengthen HP's enterprise offerings.
Mark buying Palm seemed really out of place at the time.

~~~
protomyth
I am not so sure it was out of place. If you think of WebOS as a client to the
enterprise software, it provides an interesting story. No need for Microsoft
licenses and somewhat common (good enough for marketing) development set with
the web people.

------
dstein
It's surreal when I think back to between 2001 and 2005 I honestly thought the
iPaq running Windows Mobile was going to be the future of computing. Microsoft
and HP looked poised to dominate forever.

... and then nothing happened. Both HP and Microsoft turned out to have ZERO
vision, and just decided to stop innovating, kicked back, and collect their
big fat dividend checks. And now Apple is eating their lunch with two fists.

------
aresant
Barron's nails it:

a) "decision to cease all webOS devices (including the TouchPad) a mere 48
days after the launch" - Leadership doesn't know what they're doing
w/acquisitions.

b) "expensive acquisition of Autonomy" - $10b to jump into a new market via
acquisition which we just proved we're not good at.

c) "material layoffs" and "talent drain over the next 12-24 months' - I
believe this. Current talent bails. Changing focus means new recruiting, years
of training / efficiency building.

As a shareholder, ouch.

via:

[http://blogs.barrons.com/techtraderdaily/2011/08/19/hp-
drops...](http://blogs.barrons.com/techtraderdaily/2011/08/19/hp-drops-19-six-
downgrades-autonomy-bid-massively-expensive/?mod=BOLBlog)

~~~
gacba
You forgot the "we're refocusing ourselves to our core competency as a
software company". HP hasn't had competent software for years since HPUX and
even then, it's questionable. They are a hardware/printer company so this is
going to be a painful transition for them.

~~~
misterbwong
Unfortunately in the enterprise space, competent software isn't necessarily a
requirement.

~~~
hello_moto
That is changing, albeit slowly.

~~~
cookiecaper
Not really. I doubt it will ever change. Why do you say it's changing? All the
same BigCorp programmers I know remain employed...

~~~
hello_moto
The Java and .NET ecosystems seem to preach a better/agile way to develop
software: Continuous Integration, unit-tests, keep it simple, etc.

Sure, some of the code are still crappy, but at least they are less crappy
than yesterday.

Are all of BigCorp programmers doing this? No.

Will they? maybe, especially with the newer/younger generations.

Mobile and tables are making in-road to enterprise.

Enterprise slowly decided to give cloud (SaaS, not the other *aas) a chance
because they don't like to have in-house IT departments (whether this is good
or bad I don't know).

When you see BestBuy using Google AppEngine even for their simple app, I think
that's a sign of change.

Is it going to get better all across the board? probably no. But they're
changing nonetheless.

------
jwn
This graph is much more useful if you compare it against some other tech
giants:
[http://www.google.com//finance?chdnp=0&chdd=1&chds=1...](http://www.google.com//finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1313784000000&chddm=103615&chls=IntervalBasedLine&cmpto=NYSE:IBM;NASDAQ:DELL;NASDAQ:GOOG;NASDAQ:ORCL&cmptdms=0;0;0;0&q=NYSE:HPQ&ntsp=0)

------
edw519
_I said, "No, I'm never going to leave Hewlett-Packard. It's my job for life.
It's the best company because it's so good to engineers." It really treated us
like we were a community and family, and everyone cared about everyone else.
Engineers—bottom of the org chart people—could come up with the ideas that
would be the next hot products for the company. Everything was open to
thought, discussion and innovation. So I would never leave Hewlett-Packard. I
was going to be an engineer for life there._

\- Steve Wozniak, interviewed by Jessica Livingston in "Founders at Work"

<http://www.foundersatwork.com/steve-wozniak.html>

How sad that it's come to this.

~~~
gamble
HP is so far from the founders' ethos that hearing people talk about the old
days is like looking at pictures of Beirut before the civil war. I have
friends who still work for HP, and it's an amazingly toxic environment with
absolutely no concern for good engineering or quality products. I honestly
think Fiorina and Hurd would have been delighted if they had the ability to
fire every engineer in HP and outsource all product development to China.

~~~
tsotha
The really interesting engineering that happened at HP was all spun off as
Agilent in 1999. What's left is just your garden variety technology company
that does a lot but doesn't seem to do any of it very well.

------
notatoad
the market always hates big risky decisions. it isn't any indicator of whether
it is a good choice or not.

~~~
artsrc
If this was accurate then there is a strategy of buying every company that
makes big risky decisions. If the market always hates them, but in general
some are good then this strategy will win.

Of course few simple strategies are good so this one probably is not either.

------
cubicle67
This was in my email this morning

 _Dear webOS developer:

We have opened the next chapter for webOS, and we understand that you must
have many questions. Yesterday we announced that we will focus on the future
of webOS as a software platform but we will no longer be producing webOS
devices. While this was a difficult decision, it's one that will strengthen
our ability to focus on further innovating with webOS as we forge our path
forward. Throughout this journey, our developers will continue to be a vital
part of the future of webOS._

I feel genuinely sorry for these people - the WebOS team within HP. I'm
assuming they knew nothing until the news was made public, and it must hurt
like hell to have to compose an email like this (and then have PR sanitise it)

------
johnohara
I installed ten (10) HP 3130 desktops two months ago for a local dental
practice. No issues. Not one. Nice machine, fast, quiet, runs cool, plenty of
space, 4GB, etc.

The list price is $789.00 but they were purchased for about $599.00. At that
price the margin can't be very much. My guess -- $150.00

But it takes a lot more energy and logistics to move 1MM desktop PC's than it
does to move 1MM iPhones.

If HP is getting out of this market (behind Dell and IBM) it must mean desktop
PC's as we know them are dead.

------
j_col
Not supprising, as on the face of it, it looks like utter madness.

------
wwkeyboard
Dose the stock market reflect real investors(by 'real' I mean people looking
at where the company will be in a few years and planning to hold an investment
for that length of time)? I wonder how much of this is an institution selling
enough shares to change a metric and trigger a bunch of algorithms.

------
oswiego
I really wish HP would stop chasing for a market and double down on the one
they are good at. HP chased the hot and fresh tablet market. Flop. This move
to a more enterprise serving model just looks like HP is chasing the cloud.
You know what I want? I want a new HP calculator. I love my HP 50g, but it's
about time for some innovation. It wouldn't even be too demanding on R&D (if
that department even exists...), just strip down some of those tablets and
sick'em in calculator body, make software and hardware hacker friendly. I
don't think it is too much to ask for a calculator that is comparable in
utility to a consumer level PC for mathematics processing.

------
espeed
A few months ago HP acquired Vertica
(<http://www.vertica.com/resources/videos/>), which was founded by Mike
Stonebraker (<http://en.wikipedia.org/wiki/Michael_Stonebraker>), the inventor
of PostgreSQL. Vertica is the real-time big data analytics system that Zynga
is using -- it looks like HP is planning on making a push into that space.

------
Bo102010
I don't think the HP leaders will regret the change of focus to businesses
instead of consumers. Every day we hear that businesses are sitting on
increasingly huge piles of cash and that individuals are increasingly jobless.

Then again, I'm not scooping up bargain HP shares, so my idle speculation
isn't extremely compelling even to me.

------
dblock
Do look at what the rest of the market is doing! So the market doesn't
specifically hate HP that much, maybe a couple %.

~~~
roedog
HPQ was down 15% and the DJIA down 0.26%. The gap appears to be widening.

~~~
smackfu
IBM is down 4% too, so maybe it's the services sector.

~~~
protomyth
yeah, I am pretty sure you are right. I think we are going to have to wait a
month to see the true delta.

------
chollida1
To be fair, they also missed on earnings. that's going to account for a fair
bit of the drop as well.

------
unohoo
I wonder if Nokia had approached / will approach HP to acquire WebOS. With
Elop @ Nokia's realm, I am skeptical. RIM is too busy building its on OS to be
really interested. Amazon, Intel and Samsung seem like very likely candidates
to take WebOS off HP's hands.

~~~
barake
Nokia, RIM and Samsung seem pretty committed to their choice of OS. Rumors of
Amazon tablets running Android keep surfacing but Amazon and Google are not
exactly friends - Android is likely the least painful OS choice. They could
buy WebOS and be free of Google and avoid developing their own OS from
scratch.

If you think about all the services Amazon offers they're basically just an OS
and some hardware away from being a "full stack" iOS competitor.

------
tluyben2
Rehash to go for biz only, wait for Ellison to be in a mood, get bought,
everybody happy. No?

------
Finnster
What does a company like HP usually do when they have thousands of unsold
tablets like this? Take them back and throw them in a landfill or will there
ever be a clearance sale?

~~~
Osiris
I'm waiting to see how I can get my free TouchPad. Better to put it to use
than the throw it away, right?

------
protomyth
I do wonder, with the withdrawal from the PC market, will this affect the
sales and placement of their printer lines or are they spinning those off too?

------
RexRollman
The stock market's reaction is understandable to me. This is a big change in
what HP does and it's going to take a long time for this to play out.

------
roedog
The autonomy acquisition seems to be the sore point. The reduced forecasts
also seem to be a factor.

------
paulocal
Putting in a buy order at $20

