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One CES Lesson: HP's Apotheker Had It Right
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Guest,
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1/31/2012 | 2:50:20 AM
re: One CES Lesson: HP's Apotheker Had It Right
I think Meg Whitman will have to do something before she has "all the finesse of a (drunken) bull in a china shop." To this point, she has basically just said that she is going to continue down the path of irrelevance with HP's outdated business model. Leo made a mess of the execution ($12 billion for Autonomy was maybe the most absurd acquisition in IT since, well... Palm), but he at least recognized the need to change something. Meg seems to have decided that the reinvention thing didn't work, so lets go back to ink and pushing PCs and x86 servers in volume as the margins continue to tank.
Radio Free Omaha
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Radio Free Omaha,
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1/30/2012 | 10:35:46 PM
re: One CES Lesson: HP's Apotheker Had It Right
"They've taken Apple's smartphone and tablet concepts and produced as good or better versions running Android." Hilarious! "After spending a week at CES, I'm convinced that along with Apple--which could be relegated to much smaller market shares based on its price premium...." Hilarious! So I was thinking this was a comedy column. But then I came to the reference to Meg Whitman, which was soberingly right on, except it didn't seem to make clear that she is the one that has "all the finesse of a (drunken) bull in a china shop." If you'd done that, then that would have returned you to your winningly funny ways. Although it might still have been being too nice to her.
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1/21/2012 | 5:33:30 AM
re: One CES Lesson: HP's Apotheker Had It Right
Good comment, Art. I agree, there are no great options for HP, only less bad options. They tied themselves too tightly to Microsoft and now they are going to lose a substantial portion of the client side with the rise of Android/Linux and Apple. HP, and Dell, seem to be blind to that fact. They are just addicted to Microsoft's steady revenue streams, albeit at give away margins, and do not want to take on the user experience side of the OS.

IBM does more than ok, but that is a different story. IBM sells highly differentiated servers/storage and software (as well as services) which have little to do with the client side. There were no strong synergies for IBM with PCs as all of their businesses were in the data center or on the business process side. Unlike IBM, HP has to worry about the impact of PCs on their large printers/ink and lower-end x86 servers businesses. No one stopped purchasing WebSphere or mainframe because they could no longer get a bundled deal with ThinkPads, but they may stop purchasing HP printers/ink and x86 servers if they cannot purchase them with PCs. IBM was also were not so foolish as to acquire a giant PC company when the writing was on the wall that PCs were becoming commodities. IBM acquired PwC plus software companies, HP acquired Compaq and they have been going in different directions since that time. That is HP's issue, the "Compaq problem", they have too much of their business wrapped around the client side or client-plus commodity data center hardware.

As you mention, this may be a slow death through attrition as the Asian manufacturers break-up their PC/printer strongholds (or PC/printers just become irrelevant), but I think losing PCs would result in a rapid death. At least holding onto PCs gives them time to come up with a plan.... Other than that, things are great at HP!

PS, I think the Itanium blowup by Oracle is going to be a huge hit for HP, much larger than people realize. The Itanium servers, BCS, look negligible on HP's financials, but when you consider the services/software that is attached to those installs, as well as x86 servers/storage that are held in place by them, it is a much larger impact.
ArtWittmann
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1/19/2012 | 3:47:30 PM
re: One CES Lesson: HP's Apotheker Had It Right
Excellent summary of the situation, Simon. The notion of the one stop shop is certainly something that Ray Lane said HP's customers want from the company. But I don't think that really exists today. If you take end user computing devices to be just laptops and desktops, then sure, HP's one stop shop story makes sense.

But that's not the case anymore. There simply is no vendor who has your smart phones, tablets, PCs, servers, storage and more. So if that one neck to choke was really important to me, I'd pick Samsung to be my end user hardware provider and HP, IBM or Dell to provide the back office gear.

Your point about price leverage with Intel is a good one, but I'm not sure it's so big as spell the need for staying in the end user system business. IBM does ok.

You see both HP and Dell moving as quickly as they can to beef up differentiated offerings in networking, storage, services and software. How well and how quickly they get there will have a lot to do with the health of their businesses. The asian manufacturers will take the end user hardware business. It's not a matter of if, but when. Google is doing its best to see to that.
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1/19/2012 | 4:57:17 AM
re: One CES Lesson: HP's Apotheker Had It Right
Good article, Art. I don't know if I agree about HP and PCs. I definitely agree that PCs are commoditized and everyone and their cousin is coming to compete. The problem for HP is that their whole company is built around PCs at this point, or at least the one-provider value proposition. They rely on their component volumes from PCs to lower the costs on their pretty undifferentiated x86 servers and storage. Also, if HP loses its "one-stop all IT infrastructure" value proposition, what's left? If they have to compete based upon each product set's individual merits as opposed to a bundled deal, they will get killed. Servers are behind IBM. Storage is behind EMC, NetApp, and IBM. Networking is behind Cisco and Juniper. Outsourcing/managed services are behind IBM, Accenture, and the Indian companies (Tata, Infosys and the rest). Software is behind... every major software provider and is largely tied to their infrastructure. They will still have print/ink, but that is declining and also tied to PCs. If their customers are no long "HP shops" and look at each purchase individually, bad things happen for HP. IMO, if they lose PCs, they lose x86 servers (Itanium is pretty well gone already), if they lose x86 servers, they lose storage and network, if they lose hardware in general, they lose software/services. You may be right that companies will start to shop PCs independently from everything else and the same result will happen through attrition, but corporate IT managers don't really change anything unless someone is making them. It could take a long time.


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