Tuesday, March 22, 2011

a cornucopia about to flow

we're starting to have HP writers... hooray.

For some reason, for the first seventy years of HP's history, no HP executive ever published a book about the company, or even their own experiences. Sure, there was Barbara Waugh's personal saga which is a wonderful tale from an HR and humanistic perspective. And Dave Kirby and Karen Lewis helped ghost Packard's autobiography.

John Minck continues to update his essay about HP roots and personalities, first published almost twenty years ago now. Gosh, does that seem possible?

Now, there are new encouraging signs. John Stedman, who provided significant help for Ray Price and me on our book re the peripherals history, has published his memoirs, a 400 page extended essay that HP buffs will find interesting. He includes much about HP's move into Bristol England as well as the Boise, Idaho experiences.

More significantly, Webb McKinney is engaged in writing 'the story' of the last twenty years, from his vantage point on Lew Platt's and Carly Fiorina's staffs. Webb managed the integration of Compaq and HP, one of the alltime best large-company "mergers" He has been working with Robert Burgelman at Stanford's Business School on this project. They have a singularly effective article about HP's failure to seize the network hub business that I heartily endorse. This could be one of the best business books about a large company in search of keeping its excellence. I can hardly wait. Burgelman is well known for his close association with Andy Grove and the Intel story; his involvement will doubtless help the sales by giving the book credibility at the major business schools, something that we managed to avoid by taking our own approach rather than the Harvard Biz Press model.


Now there is a new word to me -- "gobsmacked"

I got a note from an independent writer, John Joss, who recently got a copy of The HP Phenomenon. He wrote, "Chuck,I am absolutely gobsmacked at your immense
effort with the book. The level of detail and historical accounting is staggering. I am, quite literally, in awe at what you have done."

I had to look up the word. Joss is British, fitting since the word is British slang for "awestruck, dumbfounded, as in so surprised that you clasp your hand over your mouth"

Joss continues: "I hope you're slaving over a new edition with the Hurd/Apotheker transition, since this is in its own way as fascinating--not entirely in the gossip
sense--as the pretexting subject. But of course the enormity of the corporation makes it very much a moving target. Also, for a reviewer, a bit like the blind men describing an elephant: wall, tree trunk, rope."

Thursday, March 3, 2011

a kinda slow February for HP

The first quarter earnings report was really quite interesting for the "HP Student"
Consumer-facing products, e.g. PCs and such, down 12%. Hummn. Along with the 'new' HP version of the i-PAD, announced a week earlier, which got reviews ranging from tepid to scathing. Hummn. And then yesterday, the i-Pad 2.0 with Steve Jobs himself going on-stage despite his medical leave of absence. Prediction -- as it once was, HP is once again struggling with the consumer side of things, for lack of excitement and Wow factor. Margins, which hit 6.4% (highest on record for a long time), will get hurt; revenue will get hurt more.
Does it matter? Probably not, in the middle term.
Services was down 2%, and margins were under pressure, according to the same press conference. But -- and it is a mighty big "BUT" -- this is essentially the largest segment of HP's total business revenue today, and the margins are 16%, not 6%. Guess what. This is the one that matters. This is the one where HP creativity, and EDS relationship building, can put new lead in the pencil, so to speak. Small wonder that this is where Apotheker moved to restore salary cuts, to help strengthen morale in a group that felt under-loved.
Does it matter? Absolutely, short-term, middle-term, but especially long-term
Printing and imaging. Up, surprisingly, 7%, with 17% margins. Same size as Services, same margins, still growing. Whew! This one perennially feels like it is vulnerable, but somehow keeps delivering. And the emphasis on commercial grade hardware units, up 33%, has to feel like a punch in the arm. Without it, and without ink, the rest feels plateau'd, but if this can stay the course for a few years, it will be the cash-cow HP has to have to make real inroads into the newer arenas.
Does it matter? Yes, for the short-term, and yes for the middle term. For the long-term, this is still best thought of as an annuity.
Which leaves servers and enterprise level stuff. And here there is a real story. Note that PCs for Commercial Clients were up 11%, servers were up 22%, and the i-Pad 'answer' and the Palm WebOS are all being positioned as Enterprise Tools. Margins for the aggregate approach 15%, with an aggregated growth with Software of better than 15%. This is the 'new' version of the 'old HP' -- not the one of voltmeters and scientific measurement, that divested long ago -- but the 'hardware centric' side of HP. This, not the consumer side, is the sweet spot for HP, just as IBM realized when they sold their PC group to Lenovo. Yes, HP has done a terrific job viz Dell and Lenovo and the old IBM PC guys, and their printers are still the class act (though tell my wife that as her 'high end home office machine fails yet again), but this set of focused products is where HP's edge can still shine, and is about to see even more emphasis. Shane Robison's focus for several years has been in this area; it has been a semi-invisible story, but believe me, it is crucial to HP's future. And the evidence is actually looking good, if we believe these numbers.
Does it matter? Didn't I already make that case?
Finally, what's to make of a quarter that is UP 27% in GAAP (or non-GAAP) earnings, given how tight a ship the last guy reportedly ran? This is an anomaly that is hard to understand. Yes, margins improved, but 27% is astonishing for a company that is up 4% overall in revenue. And it happened in a quarter when R and D got 're-invigorated' and salary cutbacks got restored, so everything is counter-intuitive here. I know Hurd took huge salary and perks for himself and a few others, but the firing bonus doesn't get compared until 3rd quarter -- what are we missing here? Nice that it went in the right direction for shareholders -- its time that they and employees both get treated well at the same time.