Friday, August 19, 2011

kinda called the shot?

I just re-read my own blog a bit, in view of the news this week for HP. May 21, analyzing the second quarter numbers, I opined that HP is screwed in the consumer market -- PCs as well as TouchPads, etc. While hardly new news to anyone (since some pundits have said this for thirty years), it was satisfying to me to read my own prophecies and realize they were pretty accurate.

Today, I'd have to say, "What were they smoking over there?" This company has been out of touch with consumers for so long it is embarrassing. (Again, some longterm observers would say, "Charlie, name me one time they were in touch"). They make Motorola's disaster look like child's play, although they aren't (yet) being compared to Enron or AIG.

But for the world's largest revenue high-tech company on the globe, this has got to be viewed as mostly catastrophic. Predictably, the stories this morning go back to Carly's tempestuous acquisition of Compaq, clearly pinning the blame on the Wicked Witch. But it is hard to blame it all on Carly. She's been gone an eternity in Silicon Valley years. Consider -- she was bounced two and a half years before the i-Phone appeared, more than five years before the i-Pad appeared. Think of it this way -- Apple had yet to average 1 million i-PODs per quarter, or i-Macs per quarter -- when Carly was deposed.

It was Marc the Knife (the kindest appellation we've heard in a year for this abusive tyrant who was praised all over Wall Street) who presided over the destruction of R and D (along with ethics, any sense of community involvement, charity, or tragically, the HP Way) that paved the way for this denouement of an icon.

Apple did do R and D, with acute market sensitivity, and boosted i-POD sales by ten times in the next two years, boosted their PC/laptop sales by four times in the next five years (into a "dead, mature market"), and without the i-Phone and the i-Pad built a dynamic exciting company compared to the cost-cutting enterprise-focused Palo Alto progenitor of Silicon Valley.

And now, based on four exciting consumer-facing product lines (only), Apple has surpassed IBM in total revenues, and is about to pass HP. The only saving grace for HP in terms of 'standing tall' is to note that 'iconic' Intel, Cisco, Dell, Microsoft, Oracle, and SAP have all stagnated worse than HP, while other iconic companies, notably Sun and Motorola, have disappeared.

Unfortunately, American companies, by and large, are being managed (and lauded) by folk who resemble the leadership that has just failed HP.  Check the statistics for DuPont, Merck, Kodak, Boeing, John Deere, General Motors, AT&T and Verizon, or your favorite retailer, and it paints a sorry picture for what the Wall Street Journal and Harvard Business School types admire.

7 comments:

fal said...

As a former employee and current shareholder, it alarms and pains me to read the many commentaries about HP's announcements yesterday. Unfortunately, I have to agree with some of them, especially the following concluding section of a MarketWatch column today.

================

No leadership

Perhaps most damning is that HP is an asylum run by the inmates, with varying degrees of delusion and plain craziness across some of its biggest moves lately year.

The company announced a $10 billion buyback in 2010, and executed over $4 billion of that plan. Just weeks ago it announced plans to buy back another $10 billion in shares. Yes, HP had $12 billion in cash as of this spring… but where is that money coming from in light of this $10 billion buyout deal unveiled this week? Was the buyback plan just a PR move to cheer up investors, or did the company honestly have no idea it would be burning $10 billion in this recent buyout of Autonomy? Read why HP’s repurchase is one of 5 bogus buybacks at big-name stocks on InvestorPlace.com.

In reporting earnings Thursday, Hewlett-Packard lowered its revenue forecast for the year, which hurt the stock. But more disturbing was the sideshow that surrounded these announcements. After rumors surfaced that HP was considering spinning off its PC business, the company confirmed talks with a surprise press release — that just so happened to drop the bomb about killing its its webOS mobile business on top of disclosing earnings about a half hour before its scheduled time to report numbers.

Who the heck is running this operation?

That question looms large, as the company continues to struggle to find its way. Carly Fiorina was forced to resign as chief executive officer and chairwoman in 2005 following “differences [with the board of directors] over how to execute HP’s strategy,” according to a corporate press release. Funny to think they had one, given the last few years.

Then in 2010, CEO Mark Hurd resigned amid controversy over sexual harassment claims and shenanigans over expenses. It’s one failure in leadership after another.

This leadership vacuum is perhaps the most disturbing things for shareholders. Because until HP gets some adult supervision, it will continue to make stupid and lazy business moves — and share prices will continue to suffer.

fal said...

As a former employee and current shareholder, it alarms and pains me to read the many commentaries about HP's announcements yesterday. Unfortunately, I have to agree with some of them, especially the following concluding section of a MarketWatch column today.

=====================

No leadership

Perhaps most damning is that HP is an asylum run by the inmates, with varying degrees of delusion and plain craziness across some of its biggest moves lately year.

The company announced a $10 billion buyback in 2010, and executed over $4 billion of that plan. Just weeks ago it announced plans to buy back another $10 billion in shares. Yes, HP had $12 billion in cash as of this spring… but where is that money coming from in light of this $10 billion buyout deal unveiled this week? Was the buyback plan just a PR move to cheer up investors, or did the company honestly have no idea it would be burning $10 billion in this recent buyout of Autonomy? Read why HP’s repurchase is one of 5 bogus buybacks at big-name stocks on InvestorPlace.com.

In reporting earnings Thursday, Hewlett-Packard lowered its revenue forecast for the year, which hurt the stock. But more disturbing was the sideshow that surrounded these announcements. After rumors surfaced that HP was considering spinning off its PC business, the company confirmed talks with a surprise press release — that just so happened to drop the bomb about killing its its webOS mobile business on top of disclosing earnings about a half hour before its scheduled time to report numbers.

Who the heck is running this operation?

That question looms large, as the company continues to struggle to find its way. Carly Fiorina was forced to resign as chief executive officer and chairwoman in 2005 following “differences [with the board of directors] over how to execute HP’s strategy,” according to a corporate press release. Funny to think they had one, given the last few years.

Then in 2010, CEO Mark Hurd resigned amid controversy over sexual harassment claims and shenanigans over expenses. It’s one failure in leadership after another.

This leadership vacuum is perhaps the most disturbing things for shareholders. Because until HP gets some adult supervision, it will continue to make stupid and lazy business moves — and share prices will continue to suffer.

MJBauer said...

I always check here after HP announcements to get an insiders pulse. You can read my observations on the HP announcement here (https://plus.google.com/?hl=en)

Openness calls upon me to say I am an ex-EDS employee (I left EDS many years ago) who is married to a current HP employee who was swept up in the EDS acquisition by HP

Ian Osborne, Grid Man Now! said...

So, in the mid 90's we had the burning ambition to become the market #3 in PCs. Even then the race to the bottom in the marketplace led us to worry about profitability, still HP's #1 goal? However, at this point with HP the dominant technology vendor in the mainstream windows pc business, we can't make a dime? What price a large market share?

chuck said...

Actually, Ian, HP does make a dime or so in this business. They netted 5.9% last quarter, even as the consumer side 'shrunk' 15% in gross revenues. Six percent on $40billion is $2.4 billion per year, not bad for a 'losing commodity'. No one in fourteen years, except Apple, has done any better, and some aver (including Hackborn who designed the strategy) aver that this shelf space presence helps enormously with the printer business, which is another $25b at sixteen percent operating margins. So between them, it is $65 billion revenue, and $6.5billion operating profit, a cool 10%. Lots of companies would be pretty happy with that.

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