HP: How can something so large be so clueless?

In addition to just liking gaming and technology, I also have a hobbyist level of interest in the actual businesses behind those things. I like to think that we can learn a lot about the stuff we enjoy if we also know where it comes from and the trials and tribulations of making it. I’m no MBA and the only business I ever tried to run flopped like a wet towel on a tile floor so I can only make observations as an outsider with no real intimate knowledge of the corporate structure and politics involved. So really, I have about as much expertise as your average stock analyst.

I’m sort of a half fan of HP. I think most of their consumer computers are crapware-laden junk with horrible support and are second only to Acer in terms of my most disliked brands. When it comes to corporate machines and servers however, it’s an entirely different story. My employer is an HP shop and the stuff we use is very solid, reliable and supported very well. Given this, I was quite shocked along with many others to hear the news that the company had abruptly decided to nuke its WebOS phones and tablets from orbit and wanted to divest its PC business (one of its biggest revenue drivers and a market they lead in) altogether in favour of becoming a software and services company like IBM. They also announced they were spending $10.3 billion to kick this strategy off by buying Autonomy Corporation, a company no one had heard of and which many believe was highly overvalued at that price. Will Smith from Tested.com took a lot of stick for claiming just before that “HP is in this for the long haul” but he wasn’t wrong to say that. Like Microsoft and Google, HP is known for committing to an idea for the long-term and is prepared to lose buckets of money refining that idea until it eventually reaches profitability. It’s a sound strategy for a large company, one that has proven quite lucrative for Microsoft with the Xbox 360 among other things. With the iPad commanding such a dominant share of the tablet market, a strategy of that nature may be the only way to carve out a significant niche against it. The initial TouchPad was lacking software support and had some issues but was overall considered a solid tablet that showed a lot of promise.

Unfortunately, those who believed in the long-form approach weren’t in charge anymore.
After HP’s previous CEO Mark Hurd–who righted the sinking ship Carly Fiorina left behind as she often does–was forced to resign for ultimately pretty stupid reasons, they brought in Leo Apotheker, the guy formerly in charge of SAP, a company he also didn’t do very well at. I’m not sure why they chose to bring in someone from a software as a service background to run a company focused almost entirely on physical goods but that’s what they did. After a string of disappointing financial results that began almost immediately after he took over, Apotheker decided out of the blue to take the aforementioned wild shift in direction. Customers and the press were not the only ones caught off guard, investors were too. Now they’re thinking of giving Apotheker the boot after less than a year and re-evaluating the idea of dumping the PC business, though it looks like they’re stuck with their purchase of Autonomy. I think dumping a business that while maybe not currently in growth is still a huge driver of revenue and profit for the company is a bad decision. There’s no doubt the state of the traditional PC business is in flux right now but no one has any idea where it’s going to go and it’s way too premature to consider getting out of it when it makes you most of your money. IBM got out of PC because they never figured out how to sell inexpensive computers to consumers, something HP has done very well for years now, regardless of what I think of the product quality. It’s simply not the time for decisions like that yet in my opinion.

While HP’s board may have finally woken up and learned Apotheker was the wrong fit for them, they still haven’t learned who is. It is rumoured that Meg Whitman is going to be his replacement. While she definitely has more experience running product focused companies, the shining star of her career is overseeing the hyper growth of eBay. A huge business achievement, this was followed by her then failing to strategise on its sudden plateau and decline, massively overpaying for a company that had nothing to do with their business while forgetting to secure the actual technology behind it and eventually, trying and failing to run for governor of California. So HP’s decision is to oust someone who made dumb short-sighted decisions with someone whose recent corporate achievements are similarly boneheaded decisions? What is it they feel Whitman can bring to the table that’s going to be able to clean up the new mess Apotheker has created and keep driving HP’s growth in the future?

Big business often means bad news for consumers these days but companies like HP, Microsoft and Google are the ones that have the resources to put up a fight against the likes of Apple, preventing them from dominating market segments, removing choice and ultimately, causing a worse experience for everyone. It still amazes me that an entity that is so massive and clearly has many very smart people involved can keep making decisions like these which don’t make any sense. I want to see them succeed but I don’t see how this change does that and if current trends continue as they have, they may not have much time left to get this right. Seriously guys, get your act together.

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