NET RESULTS:The company has seemed confused and unsure of its identity – even more so now after jettisoning its tablet
A BIZARRE local incongruity in the announcement last week that HP would get out of the mobile and personal computing market – abandoning its new TouchPad tablet computer – was that, only hours before, HP had been contacting Irish journalists to arrange trials of TouchPads prior to the local launch of the device.
That seems to be further confirmation of reports that only a few senior executives knew this was coming. Rumours had circulated that HP might eventually move out of personal computing, a space abandoned by most of its big-name rivals in recent years because margins are thin and the sector volatile.
But not many imagined it might be right now, with a full product portfolio, and even fewer guessed that HP would jettison its new WebOS section.
Only last year, HP paid $1.2 billion for the beleaguered Palm, a company that once dominated in handheld computing devices in the days before people expected them to work as mobile phones as well. Palm converged into handsets, but was never convincingly compelling as a handset manufacturer. And although it had an intriguing new smartphone operating system with potential in WebOS, it ran out of time to turn itself around.
HP’s purchase of the company handed it Palm’s handset models and WebOS, which would serve as the guts for HP’s iPad challenger, the TouchPad. But TouchPads, in their short lifespan, had not sold well. Still, to abandon a device after a single iteration, plus the WebOS handsets, and potentially WebOS and the patents HP had cited as a key benefit of buying Palm, little more than 18 months after such a large strategic purchase?
That’s left a lot of people scratching their heads. The company isn’t providing any clarity of vision, either.
If you are going to jettison a significant corporate strategy based on a major purchase in the recent past, and which involves thousands of jobs, you need to be able to reassure investors, channel partners, employees and customers that there’s clear thinking, a plan for managing or disposing of the unwanted asset, and a well-defined alternative strategy.
Yet in a conference call with analysts the day after the announcement, HP’s chief executive (and former head of SAP) Leo Apotheker didn’t seem to know what the company intended to do with WebOS and the patents, noting HP was looking at “all possible business models from licensing to any other possibility”. Such vague comments leave the impression of last-minute, panic decisions regarding Palm, and serve as a lacklustre endorsement of WebOS for any potential buyer or licensee.
He also noted the company was dropping the TouchPad and handsets because “the ramp-up was too long”. Yet how could HP have possibly imagined anything else, in a tablet market that HP knew was totally owned by Apple and its iPad, and in a handset market dominated by Apple and various Android handset makers (now including Google, if it gets the regulatory go-ahead for its own surprise plans to buy Motorola Mobility)?
And to have so few within the company aware that such moves were afoot – clearly sending shockwaves internally as well as externally – does little to help the confusion.
Apotheker’s bid to buy UK analytical search company Autonomy at a substantial premium to current share price, announced on the same day, also perturbed the market and analysts. Few could see any great benefit for HP – reflected in a plunge in HP’s share price and market cap – even as Autonomy shares shot up to match HP’s generous bid.
To be fair to Apotheker, his predecessor Mark Hurd was the one who did the Palm deal – a move that in hindsight is replete with its own set of ironies. Hurd was known to be critical of his predecessor Carly Fiorina’s pricey purchase of PC maker Compaq.
Yet over time, that purchase helped to push HP to the top of the personal computing sector, nudging aside once-dominant Dell, and added significant revenue to HP’s bottom line.
In the analyst call, HP made clear its WebOS division was the source of hundreds of millions of dollars in losses, which suggests Hurd’s purchase was ill-judged – or at best, under his watch, HP’s strategy for the integration and development of WebOS was seriously lacking.
Whatever about its strong revenue performance in recent years, HP has seemed confused as a company, and unsure any longer of its identity. It has had more than its share of CEO and boardroom drama. Fiorina was controversial, replaced by Hurd’s “safe pair of hands”, yet Hurd also left under controversial circumstances involving a female employee. HP’s board has in recent years been found guilty of hiring private detectives to spy on its own board members and journalists.
All of which appears utterly counter to what HP once symbolised as a company, and its famous “HP Way” pioneered by founders David Packard and Bill Hewlett and much copied in Valley technology companies. At the core was trust, bulwarked by ethics, community commitment, accessible management, a flatly structured organisation, and a low key corporate culture in which engineers and technologists were hugely valued.
Not that HP seems too out of place in the new culture of the large technology company, where baffling, poorly explained, often quickly abandoned acquisitions seem the order of the day (Google and Cisco come quickly to mind). Add to that a growing industry penchant for patent litigation as a substitute for innovation.
Meanwhile, as HP’s Autonomy bid gets under way, one wonders what Autonomy employees are thinking. Might they, too, be Palmified in a few years’ time?
