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October 07, 2014

HP decides to break up the brand

HP Enterprise Corp. StrategyAnd in one stroke of genius, it's become 1984 again at Hewlett-Packard. Yesterday brought on a new chorus for an old strategy: sell computers to companies, and leave the personal stuff to others. Except that one of the others selling personal computers, plus the printers usually connected to PCs, is another generation of the company. The CEO of Hewlett-Packard is calling the split-off company HP Inc. But for purposes of mission and growth, you could call it HP Ink.

AnalysisTo be clear, that's a broad definition we used up there to define that stroke of genius. Brilliance is something else, but genius can be just a powerful force for good or for ill. Definition 3 of the word in Apple's built-in dictionary on my desktop calls genius "a person regarded as exerting a powerful influence over another for good or evil: He sees Adams as the man's evil genius." It's from Latin meaning an attendant spirit present from one's birth, innate ability, or inclination.

What's become the nature of Hewlett-Packard, its innate ability? The company was founded on one ability and then had a second grafted onto its first success. It's been 30 years now since 1984, when the vendor which invented MPE and the 3000 has been inventing products for consumers. The LaserJet opened the door for a torrent of ink and toner to sweep around traditional technology innovations. Before there was a need for a battalion of printing devices and a phalanx of personal devices, the old HP logo represented business and scientific computing. Plus a world-leading instruments business whose profile was an icon for what HP was known for best.

HP's been down this path before, splitting off those instruments into Agilent in 1999. A few months later Carly Fiorina won the approval of then-ink czar Dick Hackborn, placing her in the CEO's seat. Yesterday's announcement of splitting the company into two complementary entities returns the Hewlett-Packard name to enterprise computing. But it seems the core values of the only major IT vendor named after its founders won't rebound into favor. Not on the strength of just splitting off high-cost, high volume ink and PC business. HP needs to impress people with what it builds again. Not just what it can aggregate and integrate.

A few notes we took away from that announcement:

  • HP says it aims to be two Fortune 50 companies after breakup, but more nimble and focused
  • "The brand is no longer an issue," say HP executives, and breaking up the brand will create equal-sized businesses.
  • An extra 5,000 layoffs come along with the split-up. The running total is now 55,000 on the clock that started in 2011.
  • HP likes its own idea; prior chairman Ralph Whitworth called it a "Brilliant value-enhancing move at the perfect time in the turnaround."
  • CEO Meg Whitman says HP's turnaround made the breakup possible.
  • Its stock traded more than five times its usual daily shares on breakup news, and picked up almost 5 percent in share value. HPQ also gave away all of that gain, and more, the very next day.

That's how it goes in the commodity computing market: easy come, say the customers, and easy go. It might be why Whitman is helping the brand called Hewlett-Packard break away from the commodity business.

Some analysts have noted the current board chair and CEO of today's un-split entity, the one still called HP, will take charge of the enterprise arm of the company's future. This, they reckon, is where the real innovation and action will take place. The part of the company that pulled Hewlett-Packard into the consumer reseller model, then swallowed up the second-place PC provider in Compaq 12 years ago, has been set free to float at the whims of a roiling market. HP Inc will have to compete without a dynamic mobile product line, and so we can wish the new-ish part of the vendor godspeed and good luck. They'll need it against the likes of Apple and Samsung, or even Lenovo and Lexmark.

HP's story last year was that the company was better together, after hearing seven years of calling for a split up. High volume, low profit business was suited to a market of 1999, but once mobile devices and the Web changed the game for data processing, PCs and printers just wanted different resources than servers and software demanded. Now CEO Meg Whitman says Hewlett-Packard and HP Inc. can focus and be nimble. From a 3000 customer's perspective, that focus would have been more useful 13 years ago, when growth demanded HP buy Compaq for $25 billion on the promise of becoming No. 1.

Being No. 1 didn't last long enough to pay the bills incurred to do so many things at once. Now Whitman says that three years of turnaround action has taught the company how to do more than one thing at a time. There's plenty to do. Maybe the first thing is to choose a new color to represent its oldest business. She said HP blue to going with the multi-colored ink of HP Inc.

Hewlett-Packard didn't need multiple colors to succeed on that 1984 day it added printers to its product line. But it was a company wrapped in a handsome slipcase of collegial traditions, still working to win its way to the front of enteprise IT selections. Canon and Hewlett-Packard collaborated to sell a laser printer to anyone, not just the customers buying HP's specialized business servers. Before long, the trails it blazed in consumer sales gave it an opening for its color ink, which at one point contributed 55 percent of the company profits. That's the consumables bringing home the bacon, not the nearly-disposable printing devices.

During the era when the 3000 was given its last several years of HP life -- first five, then seven, and finally nine -- IBM was happy to point out the passion for printing at HP. One thunderbolt of an IBM sales rep called the company Inky at a HP user group meeting speech in Houston. Those were the days when everyone in 3000 territory was looking at a new future. About three fourths of the business machines became computers without Hewlett-Packard on their badges. Still, the fungible nature of enterprise computing -- that ease of replacement that HP preached against MPE -- also turned out to be true for its own Unix business line. Somehow, the same Windows that would be suitable for 3000 shops was also a good-enough migration target for HP-UX customers.

Unix had its day, and Linux was the new wave and not channeled through a single vendor. HP invited comparisons. Now its customers can compare companies, starting next fall. Do business with HP Inc. and use Windows and probably Linux on HP's iron. Or choose a company that says it's now focused on the new style of computing: cloud services, big data, security and mobility. The company does not mean to suggest there's no place for in-house servers. But it's focused on those four areas, with a mention of software during yesterday's 45-minute presentation and Q&A.

Our readers will remember software. In MPE and IMAGE they got fine-tuned and refreshed software each year, although in some years the refreshes were faint. By the middle of the 1990s Hewlett-Packard had to embrace Windows to remain on planning short lists. Now the Hewlett-Packard Enterprise has to attract and retain ever-mobile business on the strength of in-house innovations. Because if you want industry-standard commodity computing, HP Inc. is ready to take that business. It will soon be loose from the legacy of Hewlett-Packard.

04:55 PM in History, Migration, News Outta HP | Permalink

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