Friday, March 29, 2013

Even Nolan Bushnell sees it

Today's Silicon Valley Biz Journal has a story -- interview actually -- with Nolan Bushnell, where he calls on HP and Yahoo to "get creative".  Wow!  Good idea....

Bushnell, one of the whackier guys ever to come out of Silicon Valley, should know.  His Chuck'eCheese notion was about as far from HP culture as one could get, but then so was Pong.  Nolan was an indefatigable character, willing to go to third-grade classrooms and preach the gospel of doing what you believe in -- he did this once for my youngster in a small Portola Valley school.  I was impressed to say the least; Nolan has a heart of gold, I concluded that day.

But really, what do you do if you're Meg Whitman, or anyone on her board, or any of her exec team -- cheerlead, or get down and dirty with 'em, or set up prizes with contests?  This game of creativity is not a simple challenge, for a company the size and legacy of HP.  Not even at Yahoo, where presumably now the serendipity of standing together at the coffee pot can work (oops, that's an old metaphor).

Creativity, some aver, is a mindset -- unfettered, unconcerned with reality -- kind of the Steve Jobs reality distortion field idea, WHAT IF?  It takes belief that dreaming can matter, that incessant running in place is not always the best way, and incremental change, while great for the Japanese car companies, might not be the 'final answer'.   Walk Google's campus, or spend thirty minutes at Facebook -- the mood in the air is light, stimulating, exuberant (or at least it seemed so to me).

How do you command 'elan' and verve and unabashed enthusiasm?

Wednesday, March 20, 2013

Shareholders and the last twelve months

What have you done for me lately?  The most common question of a shareholder...

In the past twelve months:
DOWN: Dell, 63%; Apple, 24%; Intel, 24%; Dell, 13% after buy-out bid; ; Microsoft, 12%; HP, 3%
UP: IBM 4%; Cisco 5%

Since the November 'scare' for the fiscal cliff

DOWN:  Apple,  36% from all-time high in mid-Sept; 21% from mid-Nov
UP: Microsoft 2%; Intel, 7%; IBM, 16%; Cisco, 21%; Dell, 60% (with Buy-out bid); HP, 82%

So, despite the analysts and the dismal news, HP shareholders, for a year now, are betting on Meg and the team.  You might ask WHY?  But that is a different essay

HP Shareholders -- a 4 year perspective

Which four years would you like to discuss?  2005-09 or 2009-2013?

For Feb 2005 through Mar 2009:
DOWN -- Dell, 70%;  Intel, 37%; Microsoft, 33%; Cisco, 4%
UP -- IBM 1%; HP, 64%; Apple, 154%

Well, I'll be darned, no wonder Mark the Knife was viewed as "the savior".  Of course, it came off a low base (Carly had not pumped the stock much), and it came partially by selling off land and building, and cutting R and D.  And since HP was the oldest of these (except for IBM), and it was in a land area where prices had skyrocketed compared to New York near Poughkeepsie, he had a huge cash windfall.

For Mar 2009 through Mar 2013:

DOWN -- HP, 29%
UP -- everyone else.  In fairness, Dell was down 12% until the takeover bid a month ago.  But all the rest are UP,.  Cisco, 35%; Intel, 37%; Dell, 45%; Microsoft, 56%; IBM, 130%; Apple, 440%

Gawd, we lost Hurd, it must be the fault of the 'new folk'.  Or, maybe, as incumbent after incumbent has said, "Hurd broke this so badly it will take years to fix"

But it has been a rough four years, right?  With Hurd, then Cathy Lesjak, then Leo Apothecar; then Ray Lane briefly; and then Meg Whitman at the helm.  And in-between, buying EDS and more than doubling the workforce while adding 20% to revenue, and then Autonomy, draining the cash hoard for pratiacally zero revenue. And -- oh yes -- announcing WebOS and then the fateful TouchPad, and then falling FLAT.  

HP Shareholders -- An 8 year perspective

It's eight years since Carly was deposed, and we've seen -- well, lessee -- between "acting" and "real" (and sometimes we couldn't tell the difference), SEVEN CEO's.  What?  What the hell?

Meanwhile, CISCO, MICROSOFT, and INTEL have had one.

IBM, DELL, and APPLE have had two

How has it gone for SHAREHOLDERS?

Over the eight year period -- Feb 7, 2005 (Carly's 'big day') to March 20, 2013, here's the story:

DOWN -- DELL, 57%;  INTEL, 13%

UP -- MICROSOFT, 9%;  HP, 15%; CISCO, 22%;  IBM, 130%;  APPLE, 1130%

Hummn, HP maybe shoulda sold the PC biz.  IBM did, and made hay on ENTERPRISE STUFF
APPLE built a great tablet and 'killed PCs" which affected -- guess who -- DELL INTEL, MICROSOFT and HP.  HP did the BEST of those four; since only about 40% of HP is PC-based

What about Cisco?  They tried mightily, doing by far the most acquisitions, chasing a video vision, chasing a consumer vision, trying damn near anything to get out of plain vanilla hubs and routers.  Growth of 2.4% per year in stock value, about the same as solid bank interest, half that of bonds.

APPLE's real gains were on the iPhone, which NONE of the others did.  But if you want to see a dismal Shareholder picture, check oiut RIM, Motorola, and Nokia during the past five to eight years.

My conclusion from all of this is pretty simple, and it astounds me that shareholders don't see it -- it ain't that 7 CEOs were bad, and Meg and the Board should be sacked.  The business they are in has matured, and none of 'the big four' are doing well since they have all missed the mobile craze and the tablet craze, and are dependent on revenues and margins of PCs.  Encores are tough.

So, over two Presidential administrations, two wars, and a Lehman Bros inspired meltdown, HP is in the top third of the top dozen WW high-tech companies that were big when the Board shot Carly.  Maybe we should vote for Board raises instead of brickbats.  But I'd shoot the CEOs who killed the R and D programs (lessee now, who would that be?  Hummn, Platt, Carly, and Hurd).

sparks flew but the fireworks fizzled

Hummn... close but no cigar?  In one of the most closely contested Board votes for a Fortune 500 company in years, all incumbents 'survived' but it was surprisingly close.

Below is paraphrased rom Juliette Ganside in The Guardian (no, I didn't go to the meeting): 

John Hammergren and Kennedy Thompson, rebuked for a series of missteps, narrowly won re-election to HP's board today -- 54% and 55% respectively voted "Yea".
Chairman Raymond had 41% voting against his return, Silicon Valley high-flyer Marc Andreesse had 30% naysayers, and the lead independent director, Ralph Gupta, drew 20% negative votes.  
A California Public Employees' Retirement System (Calpers) spokesperson expressed "extreme concern with HP's path in recent years".  Calpers, a public pension fund, owns more than 8 M shares.  They voted no on all five directors, and also with 15% of total voters sore at Ernst and Young auditors, mostly over the Autonomy debacle.  Ernst and Young booked $50M with HP last year, $20M in consuting rather than auditing activity.
Meg Whitman delivered an impassioned plea on behalf of the incumbent directors, saying that they were instrumental in helped 'right the ship' which is now 'on a successful recovery path'.  Hope so.
"Initial reports indicated that the stock has halved in the past 24 months, and that was the main reason for the negative votes and mood of shareholders."
I'm not so sure.

The Autonomy Saga

So, in time for today's Annual Board Meeting (starts for HP in an hour or so), Mike Lynch has issued yet another strong attack on HP and its Board re the 'botched' acquisition of his company.  Who knpws how this one will play out, but for me the real question is -- does it matter?

Read John Furrier's SiliconAngle at silicon today, labeled "Breaking Analysis: HP Shareholder Fireworks" -- which I found just after penning the previous post, saying "NO FIREWORKS TODAY".  We'll see.

What I love about pundits is their remarkable self-confidence.  Furrier proclaims that he alone of all analysts raised questions in 2011 about HP's purchase of Autonomy, which on the surface would be fairly indicting of the analyst crowd.  Or at least put him at the top of the best of Monday morning QBs

Furrier probably doesn't follow this blog, else he'd know that at least one other observer saw 'something wrong.'  On Sept 16, 2011, two weeks after the deal, I wrote that this was "a stupid purchase, because they bought the wrong company, not the wrong space" .  On May 12, 2012, I called it "an idiotic exorbitant deal" while reporting the 2Q HP numbers.  Not the most delicate of phrasing, nor did it delve into purported misdeeds of due diligence or acquisition mis-statements.  I was simply coming from a place of what MIS directors and IT shop managers and business analytics users tell me about this relatively esoteric kind of software.   In other words, my comments were driven against the usability and value of the software, not the ethics and optics of the balance sheet and revenue projections.  Both matter -- and if Furrier is indeed correct that he alone saw the second set of issues, shame on HP leaders, but also on other analysts.  The fact that no one else (to my knowledge) has publicly stepped forward to simply say this dogfood isn't edible, no matter the cost, is more amazing to me.

Is it good dogfood?  And if so, can't HP's vaunted enterprise leadership make it into something of value.  If it is mediocre dogfood, can't the historic "HP Invent" make it superb?  Either way, does it matter to put a stick in Lynch's eye?  Time to move on?

Board watch

Today at 2pm, fireworks?  The major news ahead of the Annual Meeting was the dust-up about getting rid of a couple (or maybe three) directors.  Fueled by dissident shareholders, and too numerous to count stories about "how could this board be so bad?" it isn't surprising that the tom-toms are beating.  Nor is it unexpected that HP would take a low-key, business-as-usual stance.  Bets?

I'm betting that the fireworks show will fizzle.  No change, no clamor, no public rancor.

The main question is -- "Does it matter?"

Boards, while publicly visible and easy targets for shareholder wrath, are seldom loci of key decisions, despite what business schools and academicians insist.  Sure, they have ultimate veto power over who is CEO and for how long; yes, they have fiduciary responsibility for the accuracy of the books and the ethics of the place; and oh yes, they do approve Mergers and Acquisitions and Divestitures, including Autonomy at this place.  

But can they make a difference on the PC industry trends, or HP's competitive stance in it?  Or any other major sector -- imaging, crowd sourcing, cloud services, enterprise software efficacy, mobile phones or cosmetics for Proctor and Gamble?  Unlikely, in anything deeper than a vote of confidence or a wish list directive.   Sorry, Virginia, there isn't a Santa Claus on this one.

HP is caught on the same problem as the US economy -- lack of innovation where it matters, at the consumer level.  The dogs have got to like the dogfood at some point.   And Autonomy products just don't work as well as, say, Attensity products.  Or even those of tiny start-up Argus Insights.  Never mind whether the financial numbers were inflated, or bogus, or Mike Lynch was a blowhard -- all of which were likely true.  A 'vet check' as they say in the horse-buying world (and this, you must realize, was a giant horse-trade) would likely have revealed a lot of chagrined customers already looking for alternatives long before the Board was asked to approve this deal.  

What happens when you don't have innovation, in a world as competitive as our interconnected web-enalbed world has become, is that 'less-than-the-best' products get discovered and replaced.  What Tom Friedman calls, "UP, DOWN, or OUT".  Either the products get more capability, quick, which is UP-SCALE in terms of features; they go DOWN in cost to retain the price-conscious buyer; or they go OUT (the equivalent of outsourcing) and get SUBSTITUTED by another company's product.

And it is hard to maintain the lead -- it is a giant squirrel cage, running faster and faster to stay in place.  The Bigger they are, the Harder they fall is not just a biblical adage.  And HP has $120 Billion annual sales in increasingly mediocre products for increasingly chary customers who actually are looking to other alternative product areas for their next productivity investment.  If we may believe the press.

So, in such a scenario, wouldn't it be better to vote for keeping and empowering Board members who have a track record of reading hi-technology tea leaves -- folk such as Lane and Andreasson -- rather than booting them just becasue they've been there a while?   Maybe this time is different than last time, but Andreasson did 'see' the Facebook phenomenon and Apple did not.  Can he bring it to HP though? And of course, here we stumble again on the central question -- are Boards the primary change-agent for a company at this point in HP's life?  Nope, doubt it -- sorry Virginia....

Tuesday, March 5, 2013

All-time DOW high for NYSE

The article actually does a nice job of pointing out that price gains don't translate directly into Dow gains -- Bank of America was up more than 200% vs IBM's 147%, yet only contributed 63 points to the Dow change vs. IBM's 942 points, due to how price/volume weightings are done.
Russolillo also points out that Boeing, Caterpiller and Chevron were the biggest contributors in the 2001-2007 run-up, but then Boeing, Caterpillar, and 3M trashed the Dow the most in the meltdown.  Sound familiar?  "What have you done for me lately?"
And over at Apple, the story today is that their new iPad wristwatch will be the big profit maker for Apple next year.  Should we tell 'em about the HP-01, codenamed Cricket?
The big story was that watches today are a $60B market worldwide, with huge profit margins, and OF COURSE Apple will sweep the field.  Remember Microma?
The story the last time, and history NEVER repeats itself, was that the 100+ handheld calculator and chip manufacturers who built digital watches THOUGHT it was about accurate time, which an old analog Swiss watch could never do.  It turned out then that watches were jewelry, not functional.  My guess is there's still a lot of truth in that.
If I'm wrong, maybe Meg can get the wizards in the outsourced R&D labs to give her a clone within a couple of years.  Might save this line next time-- A"ll but one of the Dow's current components have risen since March 2009.... Hewlett-PackardHPQ +2.00% is the lone laggard; the stock has fallen 20% since March 2009.  Sixteen of the components have more than doubled in almost four years. American Express AXP +1.96% has rallied the most, jumping 503%. Write to Steven Russolillo at

WebOS was sold last week too?

Boy, I missed this one.  HP sold its once-prized WebOS to LG Electronics February 25, who plan to use it for their web-based TVs.  Recall that WebOS, not the Palm Pre telephone handset, is why HP bought Palm in April 2010.

WebOS was indeed fabulous for a DSP-based operating system, and the goal (dream maybe) was that it would become the unifying underpinnings for the PC group to join the Printing groups and maybe bring in other appliances (seemed then that HP might branch into web-TV, washing machines and smart refrigerators).

WebOS did not get the promised upgrades, and after the TouchPad fiasco, HP ultimately released WebOS as an open-source code base before selling rights to LG.

LG for its part did not comment on using WebOS for a new line of smart refrigerators.

Wow... cannot take a week off

So, I did take a week off, sorry for all you faithful readers!

I managed to ignore the signs of an incipient stroke for quite a while last Sunday morning, but when I finally realized what was happening, my wife got me to ER, and they in turn 'did their thing'.  The net result was gratifying, stupendous, awesome.  I am a believer in high tech medicine!

The situation was dire in terms of mobility, eyesight, and speech; the clot dissolved somehow within three hours of my first discovery -- what do you say, viva la Rat Poison?

Anyway, after two days of tests, observation, and plenty of commentary about medications, exercise, and diet, I was pronounced 'okay' without significant impairment of anything.  When the docs told my wife there was no evidence of cognitive impairment, she rolled her eyes and said, "how can you tell?"

So... back to the daily grind, maybe a little more slowly for awhile, but glad to be here, healthy.  For sure!

So, what happened re HP this past week?

Well, for starters Meg Whitman went public supporting the overthrow of Prop 8, lending HP support to the chorus led by Google, Apple, Facebook, Oracle, Cisco, eBay, and Qualcomm.  Meg herself going public was nice to see; first time she's used her 'bully pulpit' for a social cause in some time (and actually a much more progressive stance than she conveyed in the Governor race way back when...).

And HP launched its newest version of the TouchPad.  Did you just love the headline for CNN Money, "HP takes cautious step into Android waters with new tablet"?  Called the Slate, which was the original name for the TouchPad as I recall.

Tepid response from the marketplace.   One editorial seemed to me to get it mostly right -- "HP's bid to rejuvenate its flagging business is the Slate 7 -- which is not a premium-grade tablet, nor a remarkably cheap device. ...  While it's not obnoxiously cumbersome, it is bigger and heavier than many ....  This latest offering is a tad bit perplexing."

As Dave Packard or Bill Hewlett used to say, "What's the contribution"?