HP

The HP Dilemma



Are there any right answers for HP? Can it play in a world that isn't tied to its recent past - let alone its founders' vision for the company and the way it would operate?

Leo Apotheker, HP's CEO since September 2010, is the newest executive to try to figure out what the right answers are for the company - and yesterday's earnings call gave everyone an excellent idea of what he sees in HP's future.

He sees another version of IBM.

Product versus Service

Say HP to most people and they'll think printers. They might think PCs as well, but printers are inextricably bound with HP's brand and reputation.

And that's about all the past HP will keep as it moves into its future.

In direct contrast to Mr. Apotheker's two predecessors, Carly Fiorina - who acquired Compaq - and Mark Hurd - who acquired Palm, the company is now going to move very quickly away from hardware. Except those printers.

Forget the tablets and phones - even though they were just introduced. They're not working - so they're out. Now.

As for the PC's, he's looking at spinning off the company and as soon as HP can find a buyer, those will be gone, too.

What's taking their place? Services. The cloud. And the acquisition of Autonomy, one of the leading enterprise information management software companies.

Who'd've Guessed?

In many ways, what is most interesting is the surprise on the part of the markets and media regarding this move. In fact, it was predictable.

For all that Mr. Apotheker said he wanted to make HP as "cool as Apple," there was no way in his space that he could pull that off.

Besides which, Mr. Apotheker's previous position was as CEO of SAP, the German enterprise software giant. He's not primarily a hardware guy. he's a software and service guy. So, of course, he'd manage to his strengths.

It just worked out nicely that the economy was such that hardware purchases were moving on a downward trajectory. It made it easy for him to justify getting out - and going where he undoubtedly planned on going from the start.

The HP Way

The only real questions that are left are:

  1. In a market that has become saturated by players like IBM (services) and Amazon (the cloud), can HP find a niche for itself that it can own? and
  2. Can Mr. Apotheker, both within the company and in the eyes of the marketplace, revive the reputation of HP - a company that is seen to have lots its way? and, finally,
  3. Will he have enough time to accomplish his goals?

It's a tough go for CEOs - particularly when they're short-term oriented and are looked to for short-term results. Mr. Apotheker is at the helm of a company that has shown in its past that it can do wonders in innovation, marketshare, shareholder value and corporate culture.

But that was when it had a long-term vision and stuck to it.

Let's hope he's now pointing it not just in his preferred direction - but in the right direction.

[Note: This article was previously published on Technorati.]



A Cloud-Based Disaster for Small and Home-Based Businesses

I'm a great fan of David Pogue - mostly because, even though he's best known for his NY Times technology columns and Missing Manual book series, his first (and also) successful career was as a conductor and musician on Broadway.

(I know. One has nothing to do with the other - but there you have it. I come from a family of musicians - including on Broadway. Deal with it.)

On the tech side, one of the reasons why Pogue is so good is because he's willing to say the things that need to be said - whether it's about Cisco's decision to shut down the Flip Camera, taking on the cell phone carriers about their extra, unfair fees or, today, the future of the cloud.

Pogue didn't go there, but if you're a small business owner - particularly home-based - you were reading a real warning of problems and costs to come.

Because what Pogue wrote about is not how wonderful the cloud is and how you should move everything you do onto it - which is what we keep hearing from Apple, Google, HP and everyone else - but what it's going to cost us as the likes of Comcast, TimeWarner and other broadband providers start capping and controlling access and speed to the internet.  And the cloud.

If you're a member of any small business lobbying or support organization, the Rotary or even your local Chamber of Commerce, it's time to start getting your message ready to your internet service providers.

Left to their own devices, they'll keep increasing your costs while reducing your services. For them, you'll be a blip - at most - on their radar. Probably not even that.

For you, this is fair warning.  It's time to act.

(Originally published on Technorati.)

M&A and the UK General Election

Well before the British General Election was held on May 6th, the consensus was that there was going to be a "hung" Parliament.

You've got to hand it to the British for using an expression like that.

What it comes down to is that everyone expected - and they were correct - that no one political party would achieve a majority of votes.  As a result, there would be (at its simplest) two options:

  • Either the party with more votes would form a "minority Government" (which would have meant that they had to hope that they could get any of their legislation through) or 
  • That the party with the majority of votes would be able to form a coalition with another party to create a working majority.
The Conservative Party (the majority vote winner) went for Option Two.

That's because David Cameron (the new Prime Minister) was able to do a deal with the Liberal Democrats and, particularly, their Leader, Nick Clegg (now the new Deputy Prime Minister).  As a result, Britain has its first coalition government since the end of World War II.

Of course, as soon as the deal was done, the questions came fast and furious.  Would it last?  Could it?  Would it be possible for the two Leaders to work together?  Would they be able to keep their respective troops in line?

And, because it's Britain, the betting parlors got involved pretty quickly figuring out the odds - and taking bets - on how long it will last.

Most interesting of all are the questions about what will happen to both parties - but particularly the LibDems - the longer this coalition lasts.  Will they have any reputation left?  Will they be seen as an entity unto themselves?

In effect, will the party have its own value proposition to offer up to the public leading them to the possibility of ever being the party in power - rather than the "king-maker" as they are now?

Call it a coalition if you want, but what you're looking at are the dynamics of a merger by any other name.

M&A activity is up.  Companies which are cash rich are looking at as many distressed companies with products/services/patents as they can use and buying them up fast.  (Why do you think HP bought Palm?  It was the patents.)

Big and small, across nations, there's as good as a fire sale going on for companies that bigger boys can buy on the cheap.

Some are mergers.  Others are outright acquisitions.  Both are fraught with problems - because the key to M&A success isn't in the products, services or patents.  It's in the long-term ability of the companies - which come with completely different cultures, no matter how much they may resemble each other - to work together successfully to achieve the goals of the company that did the buy.

Why do you think Warren Buffett makes a condition of purchase of any company by Berkshire Hathaway that the management has to be strong and stay in place?  Berkshire doesn't manage its companies.  It expects performance.  Because when Buffett buys a company, he's buying its value - and the long-term success of that value comes from having a successful management team in place and staying there.

No culture difficulties at all.  It's an acquisition, but, from the company's perspective, everything is the same - only better.

Not true with the vast majority of mergers and acquisitions.

Recently I was asked to read an article for peer review on managing the run-up to M&A.  (It's not published yet.  When it is I'll provide the link.)

One of the points that the author made was that three out of five deals "do not live up to expectations" (an understatement if I ever read one).  Not because the deal was a failure on its face - but because the companies couldn't work together successfully to achieve the agreed goals once the deal was done.

This is how it happens - no matter the industry.  Big Boy company sees something they want.  They do the buy (merger or acquisition).  They find out that even though they've paid out all sorts of money to retain key people, the productivity drops, things aren't happening, the product pipeline is drying up, costs are increasing...

If you get into cross-border M&A (and that includes between States in the US, let alone international M&A), the problems become even more legion.  And expensive.

Sadly, the business landscape is littered with smaller companies that participated in a merger or acquisition with stars in their eyes - only to find themselves out of business.

That's why the UK election was such a fascination to me.

Think about it.  Cameron needs - at the same time - to work cooperatively with Clegg to achieve the goals that the Conservative Party (the majority) ran on and promised.  At the same time, Cameron has to do everything he can to destroy the LibDems (his coalition partners) so that, at the next election, they don't have a look in and the Conservatives can take their constituencies and their seats.

Simultaneously, Clegg, while he's working cooperatively with the long-term enemy and know the risks, has to help his coalition partner get things done yet show enough differentiation that, as the next election gets closer, not only can the LibDems do an identifiable split from the Conservatives, but make the case that they could have done a better job on their own.

Both of their jobs are to simultaneously work together while doing their best to undermine and destroy the other.

Nice.

This is going to be an interesting period while we watch the M&A activity on all fronts - business and politics.

For your part, if you're thinking of or entering into any M&A activity, look closely at the management with whom you'll be working - not least why they are willing to get into bed with you and what they want out of it.

M&A always looks good on the surface but when, as in the UK elections, the best outcome is to "keep your friends close but your enemies closer," there's probably a better way to do business.