Last week the IT industry had a major bombshell. HP announced it’s intention to get out of the PC business, drop it’s WebOS smartphone and TouchPad products and buy enterprise software company Autonomy. If you don’t recognize Autonomy they are a major success story born out of research at Cambridge University. Founded in 1996 they now have a $7Bn market capitalization. They are all about the software infrastructure that manages structured and unstructured data. The headlines on their website tell the story – powering the World’s largest Cloud at 31 Petabytes, 25,000 customers, deployed by 77% of Global 100, used by all of the top 10 global banks, 400+ of the world’s largest software companies. They’ve made lots of acquisitions, but they produce solid recurring revenue. In buying them and dropping PCs, tablets and smartphones HP is dropping their consumer lines of business, reducing their dependence on hardware sales, and shifting focus back to the enterprise and software in particular.On one level it’s a great shame that they are discontinuing investment in WebOS and the TouchPad. We’re in a post PC World and just this week the Guardian was reporting the shift again. I’m a big iPad fan – the tablet sector has huge significance and none of Apple’s competitors are making a particularly good job of challenging them. The only other tablet device that I’ve picked up and played with that felt like it could challenge the iPad was the TouchPad. I’ve not handled a Samsung Galaxy Tab 10.1 yet, but the smaller 7 inch version along with all of the Android devices or the BlackBerry Playbook that I’ve held don’t feel as “complete” as the iPad, even though they do the “Flash thing” and have some nice features. With Android fragmented over several hardware manufacturers, my gut feel was that HP properly investing in WebOS and the Touchpad hardware could bring them in to second place in the tablet market. Sadly the financial numbers don’t stack up. Larry Dignan quoted CEO Leo Apothekeras saying:
“However, our WebOS devices has not gained enough traction in the marketplace with consumers and we see too long of ramp-up in the market share. Due to market dynamics significant competition and a rapidly changing environment and this weekâs news only reiterates the speed and nature of this change, continuing to execute our current device approach in this marketplace is no longer in the best interest of HP and HP shareholders.”
So Palm smartphones and the TouchPad tablets are too much of a risky distraction for HP and they are cutting their losses. Understandable for HP’s overall strategy and stakeholder interests, but a great shame. Maybe someone else can take those brands (and the associated patents) forwards?
Around 10 years ago HP acquired the once great Compaq brand. As you might expect, the brand was diluted inside HP, and although the PC business is sound and generates a lot of revenue, it’s not as profitable as other parts of HP. HP are doing something similar to IBM when they sold off their PC business to create Lenovo out of China. However, I cannot quite fathom why they would signal their intention ahead of finding a buyer. I agree with the strategy, but not the execution.
There has been plenty of mixed discussion and analysis on the HP strategy, and a lot of negative press for the man in charge. As Dennis Howlett says:
“Investors have not been happy since Leo Apotheker came on board as CEO. From their standpoint, Mark Hurd, the previous CEO was a miracle worker and a tough act to follow.”
There are even headlines like “Leo Apotheker Has Totally Lost Control Of HP“. I’d go to Robert X. Cringely’s “Losing the HP Way” post to get a fuller history and context of the Hewlett-Packard company – one of the industry’s greats – but I disagree with Bob’s conclusion. They haven’t lost their way, they are re-focusing on their core business. I was in IBM in the 70s and 80s when it lost its way because it had its fingers in too many pies, too many market sectors and tried to act as market leader in all of them. Leo will let someone else make a success of that PC and tablet business and narrow the focus of HP back to the Enterprise. Go take a look at Dennis Howlett’s analysis and specifically his review of the numbers. That’s what it’s all about – the natural laws of marketing added to the financial numbers. HP haven’t lost their way – they’re making some painful decisions to get themselves refocused – apart from not finding a buyer for the PC business already I, for one, think Leo’s on the right track.
Whatever the merits of the strategy change it’s been PR disaster:
- An extreme example from Al Lewis on WSJ suggesting it’s part of a One-Year Plan to kill HP
- Leo Apotheker interviewed by WSJ defending his strategy
- Chief Communications Officer Bill Wohl becomes a casualty of the proceedings
- On a lighter note the HP strategy on WebOS and PCs have been given the Bruno Ganz/Hitler/Downfall subtitles treatment – it’s hilarious
- Leo Apotheker’s HP never wanted webOS to succeed (zdnet.com)
- A Simple Explanation for Why HP Abandoned Palm and Is Getting Out of the PC Business (daringfireball.net)
- HP Scraps WebOS, Focuses on Business Market (forbes.com)
- The HP of the Future, Starting Yesterday (fool.com)
(Cross-posted @ Business Two Zero)