Hardware-happy HP has swallowed a Sun death pill Leo Apotheker has joined a long line of Silicon Valley CEOs who have struggled to stop their hardware-centric tech companies slipping into the dustbin of history. Hewlett-Packard's chief executive has unveiled an audacious plan to turn his company from the planet's single biggest maker of PCs into, er, a software company. To …
The next business unit for the chop will be the server one, just as the virtualisation wave engulfs the bulk of the market and server unit shipments collapse. HP sees this coming and is taking action. Over the last 7 years we have gone from running 2 or 5 VMs per hardware unit to 10-20 and now 50-100 using first HP, then IBM, and most recently VMCo. Sure more businesses are buying computers than before (those that are not pushing stuff to the cloud) but 50 to 100 times as many businesses? There just aren't enough that many new customers.
Contrary to much whining, Sun was sitting on a lot of good hardware which is what Larry has found out - or knew all along - and apart from commodity servers, Sun was not really trying that hard to sell cheap low-margin stuff. In fact, Sun shunned stuff like the consumer arena, which is actually contrary to the strategy some people suggested in the 1990s which was that Sun should buy Apple.
Meanwhile, HP has become the company where good products go to die, presumably sacrificed at the altar of shareholder value, so despite there having been mileage in Alpha or VMS (two examples of many), the HP attitude was to milk those customers unfortunate enough to be locked in until they bit the bullet and fled to the likes of IBM.
So, perhaps unlike Sun, HP knew how to make a few bucks and make the next quarter's estimates. But like Sun, there's never been a coherent strategy to pull out of the inevitable dive.
The problem with buying marketshare is you have to retain interest whilst you ramp the product up to the post-intro price, otherwise you lose customer interest and never make a profit. For hp to have made a profit on the hardware alone, they needed to sell the units at the full prices they were originally listed at, but the public perception was the product was not good enough to justify that price. It would seem impossible for hp to intro the Ouchpads at the current reduced prices, then maintain interest in them enough to drive the price up 200%!
And then you have to recoup the money lost in the intro period, otherwise you run out of funding for the product. This is essentially what was happening to Sun prior to their purchase by Oracle - they were subsidising SPARC servers to try and maintain marketshare until some miracle saved them (supposedly CMT), but the public perception was that the products from the competitors were better. Eventually, McNeedy and Ponytail realised they'd burn through their cash reserves if they carried on making such big losses, so they put the company on the market. The only differences in the Ouchpad case is (a) hp have decided to axe the product line early, before it becomes a drain on the profitable areas of the company; (b) this is a sideline for hp, not their core buisiness product; and (c) hp has many other lines that are profitable.
Gavin Clark make at least one false assumption in his declaration that once a large commercial (proprietary) CRM/ERP software company gets a foothold in a client's door, they are unmovable.
That may apply - for time being - for Oracle, SAP and other behemoths of the "old software model", but the significant emergence of Free/Open Source Software (FOSS) based CRM/ERP like ERP5, OpenERP, Compiere and others that have proven robust, flexible and scalable for large enterprises - while NOT locking clients into one company - are gaining use and success rapidly.
Gavin needs to learn more about the real changes in the software world.
W. Anderson
wanderson@kimalcorp.org
I have been doing some business consulting on the side, and a few of my clients could really benefit from implementing and ERP solution, but did not give it a second thought do to the perceived costs.
Not a big follower of ERP software, I had to google your two examples. Which one of those 2 do you feel is better, or has the best following? (IE, if you had to implement one, which would you choose).
Have _always_ been awful. As has their software.
As for printers - they don't make them, or the ink. It's all a rebadging exercise with a large markup on it (which Xerox appears to be muscling in on, at least on the consumables side)
What on earth HP thought it was doing when it got into the computing business all those years ago is a mystery. They made (and Agilent still do) some of the best the gear in the world, but even then the software used to let them down badly.
Hurry up and die already, and let Agilent take back the label to where it really belongs - test gear.
You get to a point in a technology business when you're overspending on supporting your existing customers when technology has taken a turn in a different direction and you really ought to be putting your investment elsewhere. The only large IT company consistently to navigate a survival course between its legacy business and future profitability has been IBM, pretty much all the others have dropped by the wayside. Or (like Compaq and Digital) been acquired by HP, adding to their historic burden.
HP has been trying to diversify for some time, but without much sense of direction - it bought Bluestone (which had acquired UK software company Arjuna shortly beforehand: sound familiar?) only to offload Arjuna's technology back to the original developers when it changed its mind.
It doesn't really sound as if HP have really thought things through any better this time around. It might be a good time to recall that their slogan is "HP invent" not "HP acquire".
HP absolutely suck at software. Just check their awful drivers and PHUX if you want to see what they consider their crown jewels in software.
Shame - they USED to be a good company. Their ICE dev kits and oscilloscopes were second to none. They also had all the avantages of DEC kit and sofware which has gone nowhere other than the bin.
Why didn't they just put the PC business quietly up for sale? Now it is going to be trashed, as staff and customers vote with their feet and competitors carve it up for breakfast, lunch, dinner and snacks.
Why didn't they just reduce the price of the tablets and phones? Now, unsupported and undermined, they won't be able to give them away? Couldn't HP have sold that business, which it paid a lot of money for not that long ago, too?
Wait until this new joker wastes so much money he'll be forced to sell the printer division, which is where the real money is made. HP will need to keep most of its salespeople, accounting and support staff, designers, distribution network, etc., with their associated costs, for the server and printing businesses, even if it gets rid of PCs and mobile/tablet lines. With moves like this it will hang onto the dross and all the good people will be preparing their CVs right now, so they can move to competitors and cannibalise not only the PC business but the server and printer businesses too.
Someone wrote about MBAs. The main problem with MBAs is that they can't keep their Mediocre But Arrogant mouths shut. I've got what is laughingly called a 'top school MBA' and I remember doing a Harvard Business School case study on New Coke. It is widely regarded as a classic case study, where Coke did launched a new formula which its market research showed consumers preferred and would help keep Pepsi under control. It was a disaster. I simply asked 'Why didn't they just change the formula but keep the recipe change a secret - it is a secret recipe after all?' This was treated with amazement, and all the staff said it had never been suggested before. MBAs, the ultimate in style over substance, can't do much more than make announcements, never mind think. So they announce bloody everything. Like here.
HP has been in a death spiral ever since that hag poser Carly Futz-it-even-more came in.
What a sad story. What was once the pride of silicon valley is reduced to reselling midwest accounting software.
I used to have a friend, a research scientist with several PHDs. who worked there. He ran all kinds of tests so they would have a handle on when and how their wonderful laser printers would fail.
If it had not been for affordable HP laser printers back in the 80s, Apple, Adobe, and a slew of other companies would have never made it.
This decline of US manufacturing prowess makes the fall of the USSR look like child's play.
<HP's board been looking for bold solutions for the future and hoping to end their reliance on the PC>
after they bought Compaq...
Mind you, while it is clear that switching to hardware is a risky step, finding the solution is harder. Most of the other big guys are trying to go vertical, i.e. copy Apple.
So what are those dumping HP shares buying now?
When ex-HP executive joined SGI as CEO the first thing he proposed was making SGI into a hardware only company. He severed all ties with software OEM, started a new PC biz that turned over IP to Microsoft in exchange for them writing a crappy virtual memory driver for Win NT4.5. After tanking the company and completely decimating the sales channel through failed communication on the future of IRIX what did he do? He suddenly announced he was leaving SGI (with a huge golden parachute) and then shortly showed up as a Microsoft executive. Keep an eye on this executive. Im betting he will be working for the competitor who will most greatly profit from the announcement. (IBM? Dell?) My .02.
Apotheker joins the gang of three starting with Fiorina. These people are like a venereal disease to a company like HP.
They come in usually under dubious circumstances, in Apotheker's case getting kicked out of SAP. Then come in into a relatively successful company, cut the payroll and pay out new record bonuses.
Even if this current gamble fails, and it will because it is stupid, Apotheker will still get a stellar bonus.
After all, he just freed up all of that money by chopping the payroll.
OK, some facts you guys are simply ignoring. I've actually met Carly Fiorina and wasn't impressed, but I'm not blind to a few home truths.
Before Carly, hp were number five in the IT league. Compaq had leap-frogged them by buying DEC, and IBM seemed untouchable in the distance. By the time Carly left, hp had overtaken all competitors. All Mark Hurd did was execute on Carly's general plan (oh, and fiddle his expenses, and allegedly try the naughty with his marketing personnel).
Sure, Carly probably won't ever make it into The Register Top Ten Execs Ever lineup, but she was what hp actually needed at the time - a non-engineer businessperson. I'm sure there are plenty of ex-hp bods that will scream at the idea, but the fact hp climbed to number one under Carly shows she was more than partially right. Most of the vitriol flung at Carly seems to be simply because she's (a) a woman and (b) not a geek and (c) was the first woman to take a job most male geeks think should belong to blokes only.
I anticipate much furious downvoting from both Sunshienrs and ex-hp bods - now whoulda thunk they could agree on anything? :)
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