The stock market hates HP's new strategy

http://www.google.com/finance?q=nyse+hewlett+packard

by pemulis • 15 years ago

105 101 15 years ago

j_col• 15 years ago

Not supprising, as on the face of it, it looks like utter madness.

RexRollman• 15 years ago

The stock market's reaction is understandable to me. This is a big change in what HP does and it's going to take a long time for this to play out.

notatoad2• 15 years ago

the market always hates big risky decisions. it isn't any indicator of whether it is a good choice or not.

artsrc• 15 years ago

If this was accurate then there is a strategy of buying every company that makes big risky decisions. If the market always hates them, but in general some are good then this strategy will win.

Of course few simple strategies are good so this one probably is not either.

dblock• 15 years ago

Do look at what the rest of the market is doing! So the market doesn't specifically hate HP that much, maybe a couple %.

roedog2• 15 years ago

HPQ was down 15% and the DJIA down 0.26%. The gap appears to be widening.

smackfu• 15 years ago

IBM is down 4% too, so maybe it's the services sector.

wwkeyboard• 15 years ago

Dose the stock market reflect real investors(by 'real' I mean people looking at where the company will be in a few years and planning to hold an investment for that length of time)? I wonder how much of this is an institution selling enough shares to change a metric and trigger a bunch of algorithms.

rkalla• 15 years ago

I think a lot of it has to do with how the decision was... presented?

  1. HP tablet sales fail.
  2. HP warns of low earnings, then announces them.
  3. Promise to make announcement only after market closes on the 18th.
  4. Rumors that they are spinning Compaq back out.
  5. Changes mind and makes announcement.
  6. They are buying Autonomy (enterprise/IBM space)
  7. They are shooting the mobile device effort in the face.

That is... a lot of change to suddenly announce, especially given that the Palm/WebOS aqusition[1] not more than a year ago was the big new vision for the company.

They made one product and couldn't sell it[2] and pulled the plug on the entire vision while at the same time announcing a huge corporate shift.

Busy day for HP.

[1] http://www.engadget.com/2010/04/28/hp-buys-palm/

[2] http://allthingsd.com/20110816/ouchpad-best-buy-sitting-on-a...

camiller• 15 years ago

Realize that a different CEO was in charge at HP when the acquisition of Palm occurred and the new CEO came from an enterprise software company (SAP) and seems intent on turning HP into a company he knows how to run, rather than running HP as the company it is. Someone (maybe at precentral.com) likened it to when a sports team gets a new coach he recruits players for his style of game instead of building with the talent at hand, AKA "a rebuilding year".

I really, really hope they license WebOS to a good phone manufacture, The only real problem with the touchpad was underpowered hardware. I read somewhere that they got WebOS running once on iPad hardware for testing purposes and it rocked. WebOS on a dual core tablet has the potential to be really cool.

arthurschreiber• 15 years ago

The thing is, the Touchpad already had a dual core cpu built in.

I can't really imagine that HP has put the effort of completely porting webos over to a different hardware platform, but I think that instead they might have tested the enyo toolkit on the iPad and have seen tremendous performance improvements. Those, I think, can be attributed to the superiority of MobileSafari (having hardware acceleration and having a very fast Javascript VM being the primary sources of better performance).

notatoad2• 15 years ago

>seems intent on turning HP into a company he knows how to run, rather than running HP as the company it is.

but what is HP currently? all their consumer-level products are shit. i don't have any experience with their current enterprise services, but from the way apotheker is talking i'd assume they have a decent infrastructure in place there to build upon. their last few CEOs have kind of run their consumer hardware manufacturing division into the ground, maybe pulling out is the best thing to do at this point.

drieddust• 15 years ago

Was HP's expecting customers to kill each other over Touchpad?

HP is buying spree feels like recently dumped women who finds solace in shopping and dumping the new dress in overflowing closet.

On serious note, WebOS is praised all around for beauty and technical supremacy yet HP wants to drop it because the failed to execute one piece hardware. This is a very emotional and personal reaction.

aresant• 15 years ago

Barron's nails it:

a) "decision to cease all webOS devices (including the TouchPad) a mere 48 days after the launch" - Leadership doesn't know what they're doing w/acquisitions.

b) "expensive acquisition of Autonomy" - $10b to jump into a new market via acquisition which we just proved we're not good at.

c) "material layoffs" and "talent drain over the next 12-24 months' - I believe this. Current talent bails. Changing focus means new recruiting, years of training / efficiency building.

As a shareholder, ouch.

via:

http://blogs.barrons.com/techtraderdaily/2011/08/19/hp-drops...

gacba• 15 years ago

You forgot the "we're refocusing ourselves to our core competency as a software company". HP hasn't had competent software for years since HPUX and even then, it's questionable. They are a hardware/printer company so this is going to be a painful transition for them.

misterbwong• 15 years ago

Unfortunately in the enterprise space, competent software isn't necessarily a requirement.

jpdoctor• 15 years ago

> HP hasn't had competent software for years since HPUX and even then, it's questionable.

I just going to say it like this: There was a reason HPUX bit the dust.

tptacek2• 15 years ago

It kind of rankles when I hear people say HP is a "printer company" (I know you also said "/hardware', but still). You could just as reasonably call them a "calculator company". They're also the company behind the PA-RISC. When people lament the lost engineering culture at HP, they're not feeling bad for the printers.

dave_sullivan• 15 years ago

HP at a 20% discount is looking pretty good... ~50billion market cap, 5.8 p/e, 2% dividend, and they're getting out of unprofitable sections of their business. At risk of being cliche, think of it as failing fast and pivoting. Go big or go home kind of thing. Success is far from certain but it may be better than staying the course and crashing into the beach.

CamperBob• 15 years ago

Also, that $1.2 billion isn't going to look like such a bad investment when Apotheker sells the Palm patents to Apple or Google or Microsoft or Samsung for 5x that price.

In this case getting out of the business of making stuff was probably the right thing to do. Blame the US patent system, not the HP execs. The decision would've been an easy one after the Motorola sale.

fauigerzigerk4• 15 years ago

That's a Wall St. view that completely misses the point. You could look at it very differently. The new CEO is making some bold moves to undo a bunch of bad decisions his predecessors made.

Buying Palm was nonsense. HP was never the company to make it work. Contrary to that, Autonomy, one of the best software companies in the world, is a good fit for HP's enterprise strategy.

Spinning off the PC business is very likely a step towards selling it altogether, similar to what IBM did years ago.

I think these are all steps in the right direction and I'm thinking of buying the stock once the current stock market panic has settled down a bit.

dennisgorelik2• 15 years ago

Isn't it better to buy stock in the midst of the panic?

defen• 15 years ago

> Autonomy, one of the best software companies in the world,

By what metric? From my perspective they are reviled by their clients and their own (engineer) employees.

waterside812• 15 years ago

I have to give the HP board the benefit of the doubt that when they hired the new CEO they knew he'd steer them in this direction. He used to work at SaS so his expertise is software services. He must have told them in the recruitment/appointment process that he'd give some things a shot (webOS, TouchPad etc.) and failing that, he'd steer them towards services and become more like IBM.

I made a lot of assumptions, but again, giving people benefit of the doubt.

metageek3• 15 years ago

>He used to work at SaS

SAP.

kitsune_• 15 years ago

Does anyone have any experience with Autonomy and its IDOL technology? I visited their site and they look a little bit shady :)

mst• 15 years ago

I used to run their dev servers (briefly back in 2001). I don't entirely understand what you mean by shady but the tech does work - and provided you use it for the right thing, extremely well. The key is to realise that it tries to be a semantic search, not a text search - if you want brute force grep you'll be better with a google search appliance or similar, I suspect.

The development team were well looked after and the CEO now is the same as then, so I'd hope the internal culture is still pretty pleasant - I really enjoyed working there and most of the employees genuinely believed in the product's ability to deliver (when not mis-sold, which, well ... seemed to happen reasonably rarely, which is about the best I've seen in any sales department). I only left due to discovering I really HATED living in Cambridge, which wasn't really something they could fix.

dr_rezzy• 15 years ago

Ive used idol very extensively for approx 5 years. Its like combining oracle db with google search and then adding language analytics. Basically its a very advanced db (these were the first guys to really get nosql into the enterprise). You dont query the db, you search it. Keyview is also a nice addition to the IDOL stack.

tjogin• 15 years ago

I think the most interesting and least talked about thing is b) "$10b to jump into a new market via acquisition which we just proved we're not good at."

HP has never been good at software. Hands up, who fondly remembers a nice HP software experience? Who remembers a hair-pulling awful one?

(And before you say webOS; please, webOS is nicely designed, but engineering wise it's bug ridden and terrible.)

roedog2• 15 years ago

The autonomy acquisition seems to be the sore point. The reduced forecasts also seem to be a factor.

ansy3• 15 years ago

This was perhaps a good plan delivered with the poorest tact. The reality distortion field seems to be working in reverse for Leo & Co.

Moving toward an enterprise only strategy could make HP healthier and more profitable in the long run. It may even reap additional benefits from a consolidation of vision.

The PSG offers less and less synergy with the rest of the company with each passing year. Especially if WebOS is dead, which everyone knew but nobody wanted to admit.

The problem is HP could have kept webOS in zombie mode and discretely shopped around the company under the guise of licensing talks. Maybe HP already did that and its last option walked out the door.

And the same with the PSG. HP could have kept that under wraps and saved the news until the transition was nearly complete. "By the way, PSG, the #1 PC maker in the world, is doing great and we think it will do even better as an autonomous company which will happen as soon as the SEC allows it starting from today."

Instead HP delivered an abortion of bad news with little to no concern how it would be received. It's like Apotheker thought to himself, "this is clearly the best solution" and therefore it requires absolutely no explanation. Everyone should just "get it" like he does.

justincormack5• 15 years ago

Personally I think that big enterprise software and its sales model, as perfected by Oracle and SAP is dead long term, it will be killed by an on demand cloud products. HP maybe had a chance to get into this market eventually, and WebOS was part of his strategy.

But instead they decided to chase last decades model which makes high margins in the short term.

And why does no one want to try to compete with Apple?

ansy3• 15 years ago

What? The cloud IS Oracle, IBM, SAP, and HP's future revenue model. They are going to build the cloud, build the enterprise cloud services, and bill out consultants specializing in the cloud. HP's future is nothing but the cloud moving forward. HP makes the servers that are the cloud. HP's business software will sit on its servers instead of yours. HP's consultants will charge you $$$ to tell you which services work for you, provision everything, configure it, do the integration, and host it for you in the cloud for a recurring monthly fee per user.

WebOS has nothing to do with capitalizing on the cloud. It's just one of many clients to the cloud.

dman• 15 years ago

Its hard to compete against a religion.

Daishiman• 15 years ago

> Personally I think that big enterprise software and its sales model, as perfected by Oracle and SAP is dead long term, it will be killed by an on demand cloud products. HP maybe had a chance to get into this market eventually, and WebOS was part of his strategy

It's not going to be the market it once was, but those companies have very, very good reasons to use enterprise software: they can't rely on no-name cloud providers for legal and ass-covering reasons, they need the local installations and control of their infrastructure, and their sales structure is optimized for dealing with large corporations.

> And why does no one want to try to compete with Apple?

Doing your own hardware is expensive, and getting good margins much more so. HP hasn't made high-quality hardware in ages, and they can't possibly compete with Apple or Google's partners in the arena when they have to catch up and invest even more money than them.

forgotAgain• 15 years ago

Given the requirements of the US Patriot act, (cloud providers must turn over customer data to the government without disclosing it to the customer and without the benefit of a warrant), I don't see large corporations moving to public clouds. Private clouds maybe but not public ones.

jedwhite• 15 years ago

Apotheker is taking the pain upfront, and undoing the damage wrought by Fiorina and Hurd over the last decade. He only took over in November 2010, and had to take some time to look at the business, and give the WebOS launches a chance. But he's basically unwinding Fiorina's Compaq acquisition (as Michael Dell implied in his tweet yesterday), and Hurd's Palm/WebOS acquisition. HP used to have a core value of only being in businesses where it could be at the leading edge technologically. Tablets, smartphones and PCs are areas where it's been a copycat. Plus, Apotheker has likely identified as part of his review since starting (at the end of 2010) that consumer technologies aren't an area that it has a competitively differentiated core competence. [EDIT for typos/clarity]

chollida1• 15 years ago

To be fair, they also missed on earnings. that's going to account for a fair bit of the drop as well.

guelo2• 15 years ago

Another MBA type killing a great tech company. I don't understand why it doesn't occur to these boards that engineers/technologists/innovators should lead tech companies. For some reason they can't imagine that technology can save a technology company. It wasn't some genius business maneuver that turned Apple into the biggest company in the world, it was genius technology.

darksaga• 15 years ago

The main reason they hire MBA types instead of engineers is because the main purpose of the company is to make money. A lot of MBA's don't take a long view on technology for various reasons. Thus, when every product you make isn't shipping a million pieces a month, these guys get worried and make stupid moves. In HP's case, they made a succession of stupid moves.

Apple does have genius technology, but you can't underestimate the influence of Steve Job's eye for design in the success of Apple products.

guelo2• 15 years ago

I meant to include Steve Jobs when I referred to engineers/technologists/innovators

pemulis• 15 years ago

Not to discount the idea that tech companies should be run by innovators, but Apple wouldn't be one of the biggest companies in the world if not for its ingenious vertical integration, which ensures that competitors are always a year or more behind. A few famous examples include the way they temporarily monopolized the supply of a crucial type of flash memory for iPods, and still control the entire supply of certain touchscreen sizes for tablets. They provide the up-front capital to build factories in China to produce these new technologies in exchange for exclusivity. And after the exclusive period is over, Apple pays a discounted price, which means that their competitors actually subsidize Apple's products. There are plenty of other examples of operational genius within Apple along the same lines. Without those genius business maneuvers, they would probably be a successful company, but certainly not the biggest company in the US. The key thing is that this innovation in business ops is in the service of grand technological vision. Ops without vision dooms a company in the long term.

beagle3• 15 years ago

I agree with everything you say. And yet, Apple is not run by MBAs or MBA culture - it is being run by a person whose roots are in technology, liberal arts, LSD and hare krishna, and is a college dropout. http://en.wikipedia.org/wiki/Steve_Jobs#Early_years is illuminating about who this person is.

VladRussian• 15 years ago

>Another MBA type killing a great tech company.

Fiorina killed it many years ago. Even though she is long gone, the company has been infested with the drones since then. The company will of course linger for decades as an enterprise software/hardware provider. As exciting as SAP.

Finnster• 15 years ago

What does a company like HP usually do when they have thousands of unsold tablets like this? Take them back and throw them in a landfill or will there ever be a clearance sale?

Osiris• 15 years ago

I'm waiting to see how I can get my free TouchPad. Better to put it to use than the throw it away, right?

metageek3• 15 years ago

Bundle them with PCs, most likely. Landfill space is expensive.

edw519• 15 years ago

I said, "No, I'm never going to leave Hewlett-Packard. It's my job for life. It's the best company because it's so good to engineers." It really treated us like we were a community and family, and everyone cared about everyone else. Engineers—bottom of the org chart people—could come up with the ideas that would be the next hot products for the company. Everything was open to thought, discussion and innovation. So I would never leave Hewlett-Packard. I was going to be an engineer for life there.

- Steve Wozniak, interviewed by Jessica Livingston in "Founders at Work"

http://www.foundersatwork.com/steve-wozniak.html

How sad that it's come to this.

gamble• 15 years ago

HP is so far from the founders' ethos that hearing people talk about the old days is like looking at pictures of Beirut before the civil war. I have friends who still work for HP, and it's an amazingly toxic environment with absolutely no concern for good engineering or quality products. I honestly think Fiorina and Hurd would have been delighted if they had the ability to fire every engineer in HP and outsource all product development to China.

Daniel_Newby2• 15 years ago

Many of the good parts of the old HP were spun off into Agilent. http://www.home.agilent.com/

Any Agilent people here who can say if it still follows the old HP spirit?

tsotha2• 15 years ago

The really interesting engineering that happened at HP was all spun off as Agilent in 1999. What's left is just your garden variety technology company that does a lot but doesn't seem to do any of it very well.

jwn• 15 years ago

This graph is much more useful if you compare it against some other tech giants: http://www.google.com//finance?chdnp=0&chdd=1&chds=1...

Bo102010• 15 years ago

I don't think the HP leaders will regret the change of focus to businesses instead of consumers. Every day we hear that businesses are sitting on increasingly huge piles of cash and that individuals are increasingly jobless.

Then again, I'm not scooping up bargain HP shares, so my idle speculation isn't extremely compelling even to me.

tluyben2• 15 years ago

Rehash to go for biz only, wait for Ellison to be in a mood, get bought, everybody happy. No?

unohoo• 15 years ago

I wonder if Nokia had approached / will approach HP to acquire WebOS. With Elop @ Nokia's realm, I am skeptical. RIM is too busy building its on OS to be really interested. Amazon, Intel and Samsung seem like very likely candidates to take WebOS off HP's hands.

barake• 15 years ago

Nokia, RIM and Samsung seem pretty committed to their choice of OS. Rumors of Amazon tablets running Android keep surfacing but Amazon and Google are not exactly friends - Android is likely the least painful OS choice. They could buy WebOS and be free of Google and avoid developing their own OS from scratch.

If you think about all the services Amazon offers they're basically just an OS and some hardware away from being a "full stack" iOS competitor.

jinushaun• 15 years ago

I still stand by my belief that Nokia should've bought WebOS.

dstein• 15 years ago

It's surreal when I think back to between 2001 and 2005 I honestly thought the iPaq running Windows Mobile was going to be the future of computing. Microsoft and HP looked poised to dominate forever.

... and then nothing happened. Both HP and Microsoft turned out to have ZERO vision, and just decided to stop innovating, kicked back, and collect their big fat dividend checks. And now Apple is eating their lunch with two fists.

johnohara• 15 years ago

I installed ten (10) HP 3130 desktops two months ago for a local dental practice. No issues. Not one. Nice machine, fast, quiet, runs cool, plenty of space, 4GB, etc.

The list price is $789.00 but they were purchased for about $599.00. At that price the margin can't be very much. My guess -- $150.00

But it takes a lot more energy and logistics to move 1MM desktop PC's than it does to move 1MM iPhones.

If HP is getting out of this market (behind Dell and IBM) it must mean desktop PC's as we know them are dead.

protomyth3• 15 years ago

I do wonder, with the withdrawal from the PC market, will this affect the sales and placement of their printer lines or are they spinning those off too?

paulocal• 15 years ago

Putting in a buy order at $20

oswiego• 15 years ago

I really wish HP would stop chasing for a market and double down on the one they are good at. HP chased the hot and fresh tablet market. Flop. This move to a more enterprise serving model just looks like HP is chasing the cloud. You know what I want? I want a new HP calculator. I love my HP 50g, but it's about time for some innovation. It wouldn't even be too demanding on R&D (if that department even exists...), just strip down some of those tablets and sick'em in calculator body, make software and hardware hacker friendly. I don't think it is too much to ask for a calculator that is comparable in utility to a consumer level PC for mathematics processing.

cubicle67• 15 years ago

This was in my email this morning

Dear webOS developer:

We have opened the next chapter for webOS, and we understand that you must have many questions. Yesterday we announced that we will focus on the future of webOS as a software platform but we will no longer be producing webOS devices. While this was a difficult decision, it's one that will strengthen our ability to focus on further innovating with webOS as we forge our path forward. Throughout this journey, our developers will continue to be a vital part of the future of webOS.

I feel genuinely sorry for these people - the WebOS team within HP. I'm assuming they knew nothing until the news was made public, and it must hurt like hell to have to compose an email like this (and then have PR sanitise it)

espeed• 15 years ago

A few months ago HP acquired Vertica (http://www.vertica.com/resources/videos/), which was founded by Mike Stonebraker (http://en.wikipedia.org/wiki/Michael_Stonebraker), the inventor of PostgreSQL. Vertica is the real-time big data analytics system that Zynga is using -- it looks like HP is planning on making a push into that space.

The stock market hates HP's new strategy

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