HP: A 10 year cycle of self-destruction?

Ya gotta wonder just what the heck those wonderful people at HP are doing to a once venerable company.  A recent article in the WSJ chronicles with absolute hilarity just how badly this company is managing its business today.  http://on.wsj.com/nMheVn.

I have to go back to 1999 when I was at Compaq in recalling this folly.  Back then, I argued that Compaq should divest its PC business and its consumer division…focusing instead on enterprise computing per its $14B in acquisitions for DEC and Tandem.  PCs were a commodity, low margin business, and the Compaq margins being kicked back to resellers were being outdone by the direct selling, have it your way, value prop at Dell.  Lo and behold, Compaq gets sold to HP and the Compaq consumer biz gets a jolt from HP’s consumer business. Inkjets were where all the HP money was being made, but that channel strength didn’t hurt the Compaq acquisitions.  Was I wrong?  I’ve wavered on this one but concluded that Compaq’s future really did belong in pushing the enterprise envelope with open systems vs closed architectures then at IBM and Sun.

So it is 1999-2000, the market is frothy with big ideas, sticky sites, and eyeballs, and so ensues the Battle of Big Carly v Walter Hewlett.  Carly’s delusions of grandeur flowed and big vision statements ruled the day.  Ooops…someone failed to see that vision didn’t play well in established categories…operational excellence did…and that wasn’t Carly’s long suit.  Enter tough guy Mark Hurd.  No vision.  Just execute baby.  And the stock takes off with the return of profits based on the fundamentals.

So what does HP do??  They drum Hurd out of office based on an unproven sex scandal.  Whom does HP hire?  Leo Apotheker, an lifetime, formulaic, by the numbers SAP guy who knows software software and software.  Big spending returns to HP from the Carly era, and the guy spends $10B on Autonomy, a software play not suited to HP’s core strengths.  The stock tanks 40%.  In between, the company decides to take a run at the Apple iPad and kills it soon after launch.  Want one for $99?? Then the company announces plans to take on Microsoft in PCs with its own O/S dubbed webOS.  Anyone buying this??  Certainly wasn’t a disruptive innovation, which is what it takes to up end the status quo.  And now, the talk is about selling off the PC business, as IBM did years earlier.  Errrr….reminds me of 1999.

What happened to HP under its founders and its many loyal lifetime employees??  I recall a company that prided its on customer service and product innovation.  Pretty fundamental stuff.  Now its about financial chicanery and me-too products late to the game.  These people literally missed the Internet, though others of similar stature did so as well . Only Hurd’s operational excellence strategy kept them in the game, buying time for real disruptive innovations to drive next gen growth…innovations which never materialized.

HP has some very smart people.  Many have recently left including several top execs.  Those who remain oughta get back to the fundamentals…innovative products, great customer service, and a culture that rewards risk taking.  I’m rooting for you, HP.  But find someone from within your remaining ranks or from Apple who gets innovation and customer service.  Great execution and weak strategy beats great strategy and weak execution.  But great + great is a marvelous thing.


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