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August 25, 2011

Current events echo strategic thinking at HP

Commentary by John Wolff
CIO, Laaco Ltd.

The HP TouchPad (now effectively designated the OuchPad) enjoyed the briefest exposure to the marketplace that I have ever witnessed at the hands of HP management. Customers, especially IT managers, expect at least a little commitment from their vendors when they risk their dollars (and quite possibly their jobs) on a product or a product line.

Update: Bloomberg analysts identify HP, enterprise business as takeover targets

Marked down TouchPadAs if this wasn't bad enough, in one fell swoop HP management simultaneously calls into question their entire line of PC products by publicly airing their musings about what the corporate disposition strategy might be for the Personal Systems Group (PSG). The damage to shareholder value was nothing short of stunning; i.e. 20 percent in one day (I own no HP stock and am not short on it either.) This company seems capable of changing long term strategy on a dime with almost no warning and no real plan as to what the next move should be.

One cannot help but compare this shocking move (except for the compressed time period) to the decision that ended the HP 3000 line. In this case, however, HP was even the PC market leader and profitable. The sheer size of PSG provides parts pricing benefits to their other product lines, as well as a soup to nuts product strategy -- one which HP's CEO earlier this year hailed as a cornerstone of Hewlett-Packard's success.

If HP management was paying any attention at all last week, they would have observed that the current thinking seems to be focusing on vertical integration of both software and hardware; witness Apple and Google's success and plans. HP once saw the value in this business model with the HP 3000, until they decided that it no longer worked (kind of like the HP Way became obsolete, too). What goes around does seem to come around.

The Palm purchase seemed to be a retest of this business model, but one wonders why HP would even bother to try it in such a compressed time frame. Didn't they conduct any focus groups? Why did they rush the product to market before it was ready?

HP seems to be obsessed with trying to be an IBM clone, but IBM does not abandon their customers and products. They sell the product lines that no longer seem to fit their future vision, and do it with class. They even did that with their typewriter division, not to mention the ThinkPad PC division. Their PC business was sold to Lenovo as an intact entity that sought to preserve as much value as possible for the IBM shareholder. (I own no IBM stock and am not short on it, either.)

HP, on the other hand, seems to damage their unwanted businesses through clumsy announcements that undoubtably confuse enterprise customers. Could this happen to them, too? Who knows, one day HP may wake up and decide they really ought to be in the farm equipment business, because IT products and services are just too difficult.

Speaking of IBM, perhaps HP should seriously consider hiring IBM's business consulting services to manage the company until some adult supervision can be found. It is just a thought, but they could do worse.

John Wolff is CIO of storage and facility provider Laaco Ltd. He served on the OpenMPE board from 2002-2009.

02:01 PM in News Outta HP, Newsmakers | Permalink

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