Tuesday, October 21, 2014

Fortune's Katherine Noyes on Dion Weisler


Who is Dion Weisler?
 OCTOBER 21, 2014, 7:27 AM EDT

A closer look at the seasoned PC executive tapped to lead the new HP Inc.


 “Keep your friends close and your enemies closer” has long been a guiding rule in the military and corporate worlds. It also helps explain the choice of Dion Weisler to lead HP Inc., the printer and personal computer business that Hewlett-Packard plans to split off next year. Currently executive vice president of HP’s Printing and Personal Systems business, Weisler spent many years at Acer and Lenovo—the latter arguably HP’s most formidable competitor in the PC business today. For HP Inc., it’s important to keep that knowledge in-house as it sets out on its own.
There’s little doubt Weisler, 47, is going to need every advantage he can get in his upcoming new role. PC shipments are on a downward trend, margins are slim, and Lenovo has been padding its lead as the No. 1 vendor, with HP trailing behind. HP’s lacking strength in mobile technologies only adds to the pressure.
“The choices that Dion makes over the next few years will be critical to HP’s long-term success in the PPS space,” says Crawford Del Prete, chief research officer at IDC, the market research firm. “They can’t afford to ‘overprovision’ the market with various devices, yet at the same time, we think they need to expand in their ability to provide a more holistic experience to managing the mobile experience.”
Before taking on his current role, Australia-born Weisler served as senior vice president and managing director of HP’s Printing and Personal Systems group for the Asia-Pacific and Japan region. Weisler is credited with helping to turn Acer into a firm that “scared the other OEMs half to death,” says Rob Enderle, principal analyst with Enderle Group. Weisler is also seen as instrumental to Lenovo’s success in the category. At HP, “he turned the PC unit from a liability into an asset in a few short months,” Enderle says.
Weisler’s international experience is one of his greatest strengths, Stephen Nigro, senior vice president of HP’s Inkjet and Graphics Business, told Fortune. “He also has a lot of experience in managing businesses in multiple product categories. Personally, he’s a very detailed and fact-based sort of individual. Also, he likes to win. You want someone leading who wants to win and has competitive fire.”
Weisler, who holds a bachelor’s degree in computing from Australia’s Monash University, is famous for using surfing analogies to describe his strategic vision, Nigro says. He has long been an avid swimmer and used to swim competitively. “Dion is very engaging and has brought a refreshing sense of energy and enthusiasm to HP PPS,” says Bryan Ma, an IDC analyst in Singapore. Ma says he knew Weisler in his Lenovo days as well as his time at HP covering the Asia-Pacific region.
“A breath of fresh air” is how former HP executive Charles House describes Weisler. House, co-author of The HP Phenomenon: Innovation and Business Transformation and now executive director at InnovaScapes Institute, says he met Weisler earlier this year at a private training session for HP executives at a Stanford Graduate Business School workshop.
“He has a keen, wry sense of humor,” House says. “He believes in creativity, and actually seems to understand it; he exudes a high ethical standard—something for which Hurd and Bradley were polar opposites; and he seems self-confident, but not arrogant. He decidedly did not convey a macho attitude—just a quiet-mannered confidence.”
For IDC’s Del Prete, what is most impressive about Weisler is what he has not done. “He’s kept the product strategy very focused, developing some products just for specific countries—for example, phones in India,” Del Prete says. “This focus is very important as HP thinks about how it evolves in the client space.”
Weisler’s deep understanding of the supply chain will be very useful in his new position—particularly given the PC industry’s thin margins, says Bob O’Donnell, founder and chief analyst at TECHnalysis Research.  Indeed, “in terms of knowledge and experience, Weisler will be hard to beat,” says Charles King, principal analyst at Pund-IT.
Weisler is already thought to be one of the best PC executives in the industry, Enderle says. “He could have a massive hit if he can get HP’s potentially market-leading, high-speed 3D printer to market.”
Mobility is another matter. Phones, tablets, perhaps even wearable devices—all are challenges that HP has yet to successfully address. “As we all know, mobility is much more than just devices, and Dion seems to recognize that,” Ma says. “But in almost all of my discussions with HP PPS, their response to ‘mobility’ is still very device-centric. In fact it’s HP’s Enterprise Services team that seems to be in a better position to transform businesses. So, I’m watching to see how HP Inc. will either build or partner with others—including Hewlett-Packard Enterprise—on how to deliver an end-to-end solution rather than just talking about tablets like it does today.”
But that’s part of the job. Weisler’s new role “certainly isn’t a position for the faint of heart,” King says. If he succeeds, “the IT industry will be talking about it for years to come.”

Monday, October 20, 2014

Adam Lashinsky at Fortune interviews Steve Milunovich re HP



For Hewlett-Packard, some hopeful thoughts
by Adam Lashinsky, Fortune,  OCTOBER 13, 2014, 12:18 PM EDT

Analyst Steve Milunovich says CEO Meg Whitman has her management team “playing to win” at a company that remains among the biggest in tech.
In 2005, when Carol Loomis wrote one of her signature, exhaustive articles for Fortune, this one about Hewlett-Packard CEO Carly Fiorina’s troubled acquisition of Compaq, she quoted a Wall Street analyst who predicted that HP would one day be split up.
That analyst, Steven Milunovich, left the research business for a time. But he’s back at it again, now working at UBS, where he covers enterprise technology companies—that is, companies that sell technology to other companies as opposed to consumers. Milunovich is still paying careful attention to HP, which announced last week that it is splitting its consumer PC and printer businesses (to be called HP Inc) from its enterprise hardware and software lines (to be known as Hewlett-Packard Enterprise).
Reaction to the spin-off, beyond general praise for spin-offs, has been tepid. Writing in The New York Times over the weekend, James Stewart walks through HP’s generally weak prospects on both sides of its house. In his weekly “Monday Note,” Jean-Louis Gassée provides outsteanding historical commentary on HP’s culture, calling the company today a “tired conglomeration.”
As for Milunovich, he finds some reasons for guarded optimism about HP. I reached him at his desk in New York last week. Below is an edited version of our conversation.
Lashinsky: I wrote in an essay on the day the split was announced that HP didn’t much matter anymore, at least not the way it used to. Do you agree?
Milunovich: “HP’s obviously lost a lot of luster. It’s not the company it once was. But it is one of the largest consumer computing companies. Clearly Apple has surpassed it.  But HP is very close to being the number-one PC company globally. They are the premier printing company. Where they have faded is on the enterprise side, and the innovation halo they once had is long gone. But I wouldn’t say it doesn’t matter. I think that’s a bit of an exaggeration.” (Good for Milunovich.   How many $100B companies are there in high-tech in America?  Two—Apple and HP)
Talk about your 2005 prediction.
(Milunovich): “I apparently predicted that printers would be peeled off from PCs. I’ve always been a big believer in focus. It’s the most powerful factor in business. In the case of HP we always felt it was difficult being the premier consumer and enterprise company. Microsoft MSFT 1.03% clearly has had similar issues. In HP’s case there’s no silver bullet. No one unit is being held back. But it doesn’t encourage focus. I would argue that they should have done this years ago.”
As you note, HP isn’t separating printers and PCs, meaning the Compaq acquisition is remaining somewhat intact.
(Milunovich): “I’d argue that the Compaq acquisition wasn’t so bad. If you were going to try to be a major computer company, the Compaq deal made some sense. It’s not unlike the rumored EMC EMC -0.59% and HP combination currently [rumored], which could make some sense. Back then HP was weak in x86 systems [a type of computing based on Intel processors] and storage. Compaq gave them both. Clearly they would not be in the market position they are in today if they hadn’t done that acquisition.”  (we made this same case in 2009 in our book, The HP Phenomenon, to a fair amount of critique, esp. from HP oldtimers)
What is your assessment of HP’s management?
(Milunovich): “They’ve lost so much talent over the years. I don’t think it can ever be what it once was. (Nor can Cisco, Intel, Microsoft—did we mention DEC and Sun Microsystems and Data General?)  But I do believe CEO Meg Whitman has made improvements. We did a conference call recently with Mohamad Ali, HP’s chief strategist. Meg has brought to HP this “Playing to Win” approach, which Procter & Gamble uses. She learned it there because [P&G CEO] A.G. Lafley used it in the 2000s. (Excuse me, but didn’t Meg leave P &G at age 25 in 1981, twenty years before Lafley apparently brought it to P&G?)   They have this strategic framework. I had never heard boo about this. (Clearly, Milunovich hasn’t spent much time around HP lately!) It’s nine to 12 months old. I heard she had an offsite with the top 100 or so managers at HP. And she said, “I want you all to read this book. I’m going to test you on it.” The flight attendants noticed. They wanted to know why everybody on this flight to Las Vegas was reading the same book. It gives you a sense of the discipline there.”
Lashinsky: HP has been talking a lot about the cloud lately, but I don’t have a sense of how its cloud computing strategy is different from the competition, several of whom have been at it longer than HP.
Milunovich: “In general, observers are unclear. We talked recently to Bill Veghte [the head of HP’s enterprise group and a longtime Microsoft executive]. They’ve had three different management teams running their cloud strategy. The IT has been rebranded as Helion. It has several features, many of which aren’t available yet. So, for HP, that is a work in progress.”
Lashinsky: Toward the end of her article almost a decade ago, Carol Loomis asked Carly Fiorina who the leading technology company of the day was. Fiorina responded that there was no one company, but in retrospect Apple exerted far more than its fair share of leadership. What would your answer be today?
Milunovich: “Apple today is clearly the world’s leading consumer tech company. And IBM is the leading enterprise company. But Microsoft, Oracle, and HP aren’t far behind. The HP Inc company is probably pretty close to half consumer and half enterprise. There’s still the question of how HP fits in. I think the split is to better position the enterprise side. They are vulnerable there. Their cloud strategy is unclear to people.”
Last question: How about you? What’s different today from your previous stint as an analyst?

Milunovich: “It’s very similar to the early ’90s. We’re going through one of those disruptive periods when everything is changing. The lesson for investors is this: Get out of the incumbents and focus on the pure-plays. Going out to Silicon Valley is even more depressing than it was in the 1990s, with new players saying they are going to destroy the incumbents. It’s depressing because my clients own the companies that are under attack. But EMC and IBM—and even HP—are not going away quickly.”

Saturday, October 18, 2014

Forbes a week later

HP And EMC Call Off Merger Talks--Structural Issues Remain
Forbes, October 16, 2014
Ben Kepes, Contributor

Citing unnamed sources Reuters reports that HP and EMC have ended merger talks with an agreement not to progress. The deal, had it gone through, would have created one of the biggest technology vendors and potentially helped shore up the fortune of two beleaguered companies. It would have also introduced massive confusion and duplication on the two companies.
Activists had been pushing for EMC to explore new options, meanwhile HP had announced plans to split its own organization into two separate businesses.

This is an important development within the context of widespread legacy vendor splits – in an interview at the DreamForce conference yesterday, Venture Capitalist and HP board member Marc Andreessen stated his view that practically every legacy technology vendor (and he defined legacy as anyone over 20 years old) will split itself up in an effort to find a degree of agility and chase innovation. Notably both HP and eBay EBAY +0.15%, companies that Andreessen is a director of, are splitting themselves up.  (irony: I was giving a speech in San Francisco that day, 'forgot completely about the DreamForce conference' which meant that my choice of King Street, and then 3rd to go cross-town put me at the Convention center where 'everything' was jammed, took 40 minutes to get to Market St).

The broader context of all of this is, of course, the disruption and dis-aggregation that is apparent in the industry. The growth of cloud computing and the attendant toxicity on the revenue streams of traditional technology vendors result in serious pressure to innovate. The structural makeup of these organizations – optimized for supply chain efficiency and monolithic product and service delivery, is a direct impediment to agility.  (Agility here can be defined several ways.  One, of course, is innovation, and often that is what is meant by these words.  But it is far more than supply chain efficiency and monolithic product and service delivery that get in the way--this is a huge psychological barrier for most managers, a topic we deal with regularly)

An HP/EMC merger would have done the opposite of encouraging agility and instead created a complex franken-vendor that would have been left standing still trying to sort out internal issues and unable to respond to market forces.


Activists may not like this – but I believe that in the age of dis-aggregation, disintermediation and a new way of delivering enterprise technology, this is the best outcome for both businesses. Of course issues remain – HP’s split will help, but not cure them. For EMC it is less clear – what it does with regards its ownership of VMware (and startup Pivotal) is unclear. Problems certainly exist, but this merger would have only introduced new ones into the mix.

Sunday, October 12, 2014

The Columbian (who?) weighs in w a Bloomberg assessment

By Ian King, Bloomberg News
Published: October 12, 2014, 6:00 AM
SAN FRANCISCO — Breaking off Hewlett Packard’s personal computer unit is aimed at delivering more flexibility in facing off competitive threats. It also isolates a low-margin commodity business at a time when demand for PCs and printers is ebbing.
The split, announced Monday, separates Hewlett-Packard’s PC division from the unit that makes servers, two businesses that share common suppliers such as Intel Corp.
Dion Weisler, who will become chief executive officer of a PC and printers company that will be called HP Inc., will inherit a cash-generating business. At the same time, he may face higher costs in a market where margins are already slim and sales are edging lower, with PC shipments on track to decline for a third straight year. The new company will also find it harder to sell to corporate customers who prefer to shop for a complete range of PCs, software, services, storage and servers from a single supplier, according to Daniel Morgan, a fund manager at Synovus Trust Co.
“The margins are horrible,” said Morgan, whose fund owns 284,771 Hewlett-Packard shares. “It’s not the greatest spot to be in.”
Weisler, who was already running Hewlett-Packard’s printing and personal systems division, is taking charge of a business with $57.2 billion in revenue, and an operating profit margin of 9.4 percent, according to figures published by the company. While printers and supplies offer higher margins, the PC business cuts that in half, indicating the difficulty of eking out profits in PCs.  (let’s look at the numbers: HP has roughly $30B in PCs at 5% profit, $26B in printers at 14% profit, no sales of consequence in smartphones and tablets.  Lenovo, by contrast, is running at $32B in PCs at 2.1% profit, $7B in tablets and smartphones at 5% profit, and virtually no printers.  Take away Lenovo’s 40% of PC sales in China at 6% profit, and you see what’s happening.  Lenovo, where it competes head-to-head with HP {i.e. not China}, loses money on $19B in sales, while HP makes 6% on $27B).
 Hewlett-Packard is Intel’s biggest customer, accounting for 17 percent of revenue at the world’s largest chipmaker, according to a Bloomberg supply-chain analysis.
“I would say any scale loss that there is, we think will be overcome by speed and agility,” said Hewlett-Packard CEO Meg Whitman.
Lenovo No. 1
Hewlett-Packard may be reducing its purchasing power at a time when Lenovo Group is improving its leverage. Lenovo, the world’s biggest PC maker, followed by Hewlett-Packard, is adding IBM’s server business to its earlier purchase of IBM’s PC division.
“This is an issue of scale and procurement,” said Amit Daryanani, an analyst at RBC Capital Markets in San Francisco. “Lenovo just increased their scale.”
Lenovo had 20 percent of the PC market by shipments in the second quarter, followed by Hewlett-Packard with 18 percent, according to market researcher IDC Corp.
Hewlett-Packard, Lenovo and Dell, the third biggest-PC maker, all saw shipments climb more than 10 percent from a year earlier as corporations replaced aging office equipment. Still, that isn’t enough to lift PC shipments for 2014, according to IDC, which is predicting a decline of 3.7 percent in 2014.  (Dell, after going private, doesn’t publish revenue and profit numbers, but recall they were really struggling is why they were sold)
By splitting HP Inc. from divisions that concentrate on corporate sales, the PC and printer business might be able to move more aggressively into faster-growing markets for tablets and smartphones, which have lured away PC customers, said Neil MacDonald, an analyst at Gartner Inc.
“They will have the freedom to do it, and the cash to do it,” MacDonald said. “Old HP laptops were not elegant.”  (non sequiter comments, to say the least.  Key point though is that HP Inc. will have ‘the cash’ to do it—printing isn’t dead yet, and 10% on $57 Billion revenue is way more than Lenovo’s 2.3% on $40 Billion.  Like 6 times as much; would you prefer $6B in profits to $1B if you have to get in an investment fight?).
Under Weisler, Hewlett-Packard’s printer division has made the best of declining demand, winning market share with innovative devices such as laserjet printers that use new technology, according to MacDonald. That’s delivering healthy margins and cash that it will give Weisler room to operate.