Is Hewlett Packard in it’s death throes or preparing for sell offs?

megHewlett Packard announcing this week that it is splitting itself into two pieces. The first being PC’s and printers and the other focusing on enterprise gear and services, including Cloud. I think it’s too late for this monolith. The split they are talking about is going to take a year. That time frame by itself leaves the company with almost no forward momentum until late 2015 and by then the market will have gained on them even more.

Hewlett Packard was one of the first ICT companies to produce a commoditised, standardised, infrastructure platform based on Intel Blades that run most operating systems. That was ten years ago and the idea was solid. In some ways, it was private Cloud, with the various layers creating a highly available and flexible environment using low cost commodity components.

Those days are well and truly gone with the Cloud wars now several years in the making with some serious causalities starting to occur. It’s a race to the bottom when it comes to price and there will be more deaths long the way.

HP’s split doesn’t make a lot of sense to me. The PC market is pretty much dead, or dying, with low price Cloud powered devices taking over the world. A quick glance at most rankings for PC’s and laptops shows that Toshiba still rules the roost and things like Chrome Books are denting the market significantly. Most customers I speak with are doing away with desktops. So long term, there doesn’t seem to be much of a market.

HP has always been the leader in printers, so that might be a fall back position. But unless they are moving to 3D printing and coming up with new products, this probably isn’t a winnable market in the long-term for a super heavy ICT global company.

And that’s part of the problem. HP is too big and stuck in its ways to be agile. With other companies appearing out of the ether around it using new business models that allows products to be created, published, and decommissioned, sometimes within a year, taking twelve months out to restructure almost assures obsolescence.

That Cloud product is going to go anywhere in a hurry, and if you look at Gartner’s Magic Quadrant for IaaS, HP is all the way in the bottom left corner. I.e. A bad place. Consider then that Rackspace, a competitor to the top right hand leaders in IaaS, gave up this year, and the future of HP Cloud looks very very bleak. I certainly don’t know anyone in this corner of the world who has bought, or is looking at buying it.

HP says that splitting the company up is about making it more agile, which, if it takes that long, is going to make them largely irrelevant. So what’s really going on?

HP can’t be dumb enough, we assume, to think that this strategy is going to get them back in the game. PC’s are dead, their Cloud service would need a turbo boost of epic proportions to bring it into line with competitors, printers are increasingly a commodity, and outsource services are slowly dissipating into newer, fragmented, “as a service” models.

We know globally that HP has decimated it’s workforce and the CEO doesn’t seem, in my opinion, to actually have a handle on the business. The last three months have seen HP’s share price drop by twenty percent or more. In New Zealand, after two years of restructuring and some terrible market moves, they are essentially invisible. I assume this is happening in other outer regions as well.

So if they aren’t stupid, then what’s the plan?

Simple, they are going to sell chunks of it off. This looks to me like the traditional “shrink your way to success” attitude of the 2000’s that saw several tech giants shed staff, cut products, break themselves into pieces, then sell off those chunks (or entire companies), to competitors. A good example would be StorageTek, who gutted their global workforce, sold out to SUN, who gutted their global workforce, and then sold out to Oracle, with the less profitable parts of the company being wound down.

HP remain bullish, but the reality is that it looks like panic to me. Don’t forget a year ago that HP banned working from home and said “During this critical turnaround period, HP needs all hands on deck.” 

That was October 2013. A critical period, turnaround, and all hands on deck.

I guess that didn’t work then.

It will be interesting to see if the old dinosaur can reform its self into a modern, agile, ICT power again. But I doubt it. I don’t think they have the leadership to get there. Until then, a cautious approach is required.



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