HP to Keep PC Division(hp.com)
hp.com
HP to Keep PC Division
http://www.hp.com/hpinfo/newsroom/press/2011/111027xa.html
8 comments
While I have heard good things from a couple of people about HP's business support, my personal experiences with their consumer support division have been wanting.
My HP laptop has a locked BIOS that prevents you from replacing the wireless card. I sent them an email message describing the BIOS error message that was returned and asking for more information about what were valid wireless cards for the machine. I received a reply telling me to reinstall my wireless card drivers. Over the next few days, I tried to get someone who understood my issue, but was repeatedly told to reinstall drivers, to reseat the card, and a variety of other solutions that seemed to come from some wireless troubleshooting customer support script.
I called, and the person I talked to eventually told me to send the computer in, because "the depot would have a different unlocked BIOS that they could put on". When my computer arrived at the depot, I talked to:
- a technician who was sympathetic but very confused about why phone support told me to send my computer to the depot,
- two case managers who started out by telling me that they were "non-technical" who I had to explain what a BIOS was, and
- a rude senior case manager who yelled at me for wasting everyone's time and told me "if you bought a car with a Sony stereo, you wouldn't expect a Panasonic stereo to work in it". When I told him that he was being rude and I wanted to provide feedback to someone about it, he told me that there was nobody else I could talk to, as his superiors would not want to hear from me.
After a day of not hearing anything from the depot about when my computer would be returned, I called a HP executive support number I found on Consumerist or some other forum. The woman I talked to was exceedingly polite, but admitted she was non-technical, but then told me that my issue was "it was because HP wanted it that way" and even though it is in a user-accessible location, trying to install a different wireless card would void my warranty "just like installing Linux."
A week or so later, HP released a BIOS update to include more wireless cards on the internal whitelist, in order to support the version of the laptop in the Small Business store (same components, starting price was $300 higher).
My HP laptop has a locked BIOS that prevents you from replacing the wireless card. I sent them an email message describing the BIOS error message that was returned and asking for more information about what were valid wireless cards for the machine. I received a reply telling me to reinstall my wireless card drivers. Over the next few days, I tried to get someone who understood my issue, but was repeatedly told to reinstall drivers, to reseat the card, and a variety of other solutions that seemed to come from some wireless troubleshooting customer support script.
I called, and the person I talked to eventually told me to send the computer in, because "the depot would have a different unlocked BIOS that they could put on". When my computer arrived at the depot, I talked to:
- a technician who was sympathetic but very confused about why phone support told me to send my computer to the depot,
- two case managers who started out by telling me that they were "non-technical" who I had to explain what a BIOS was, and
- a rude senior case manager who yelled at me for wasting everyone's time and told me "if you bought a car with a Sony stereo, you wouldn't expect a Panasonic stereo to work in it". When I told him that he was being rude and I wanted to provide feedback to someone about it, he told me that there was nobody else I could talk to, as his superiors would not want to hear from me.
After a day of not hearing anything from the depot about when my computer would be returned, I called a HP executive support number I found on Consumerist or some other forum. The woman I talked to was exceedingly polite, but admitted she was non-technical, but then told me that my issue was "it was because HP wanted it that way" and even though it is in a user-accessible location, trying to install a different wireless card would void my warranty "just like installing Linux."
A week or so later, HP released a BIOS update to include more wireless cards on the internal whitelist, in order to support the version of the laptop in the Small Business store (same components, starting price was $300 higher).
Wow. What is going on there? At first I thought Apotheker was hired to complete some "unpopular" tasks, and then a new CEO could start over. But it seems like the board was completely asleep while Apotheker made his decisions. I am looking forward to some massive lawsuits brought against these people. Apotheker probably was the most clever guy in this, and knew that he could make a quick 20 million even though he would be fired. Would be interested in insights from HP employees.
I suddenly find myself wondering if someone wanted the stock price to crater, to make a takeover or mega-buy-in cheaper.
Interesting theory, and with the history of this HP board, this is actually a very minor possibility.
http://en.wikipedia.org/wiki/Hewlett-Packard_spying_scandal
You've made me wonder if the quality of the algorithms used for trading make it near impossible for the SEC to track these sort of criminal activities.
http://en.wikipedia.org/wiki/Hewlett-Packard_spying_scandal
You've made me wonder if the quality of the algorithms used for trading make it near impossible for the SEC to track these sort of criminal activities.
Lawsuits for what?
For not performing due diligence when discussing the company's strategy with the new CEO, leading to about two years of fucking around (after a decade of fucking around) and cratering the company's value to the shareholders.
Unfortunately, the board is close to dysfunctional.
http://www.reuters.com/article/2011/09/22/us-hp-board-insigh...
http://www.nytimes.com/2011/09/22/business/voting-to-hire-a-...
Understanding HP's dilemma is as simple as looking at the comps.
HP is trading at 6.5x P/E currently.
Yet HP's consulting business should be worth more separate (IBM at 14x, Accenture at 18x)
And HP's hardware business should be worth more separate (compare Toshiba at 12x, Apple at 15x, even Dell at 9x)
As a result I understand why they allowed Apotheker to do what he did.
Cut ONCE, bleed heavily and launch two strong, focused companies that aren't burdened by the distraction of the other and can unlock maximum shareholder value.
BUT wow, do they have a fricking communication challenge.
Every press release (even this one) is dry, complicated and nonsensical.
The current press release talks about a "data driven decision".
Why can't they just explain what they're doing and why?
Come on HP.
HP is trading at 6.5x P/E currently.
Yet HP's consulting business should be worth more separate (IBM at 14x, Accenture at 18x)
And HP's hardware business should be worth more separate (compare Toshiba at 12x, Apple at 15x, even Dell at 9x)
As a result I understand why they allowed Apotheker to do what he did.
Cut ONCE, bleed heavily and launch two strong, focused companies that aren't burdened by the distraction of the other and can unlock maximum shareholder value.
BUT wow, do they have a fricking communication challenge.
Every press release (even this one) is dry, complicated and nonsensical.
The current press release talks about a "data driven decision".
Why can't they just explain what they're doing and why?
Come on HP.
With all due respect, "worth more separate" is a destructive business philosophy. Unless your line of business is buying up other companies, building up value, and spinning them off.
Be that as it may, the differences between IBM and HP are stark in this instance. I-B-M: it stands for International Business Machines. Services to industry are their roots, and those roots run deep. Whether in the form of census punchcards in the 1890s, or ballistics calculations for the military, or the creation of the SABRE booking system, or the creation of relational databases... the list goes on and on and on, but the point is that IBM has never strayed from its roots. It is a business services company.
Upon hitting a rough patch in the early nineties, IBM took radical steps to revive its profits; one of these steps was the introduction and promotion of the business-oriented Thinkpad brand, which was a huge success and helped bring the firm back to health. But that did not make IBM into a PC company any more than the success of the XBox makes Microsoft a gaming company.
After nurturing the brand and working gradually over time with a Chinese supplier to offshore production, the last step (at that point almost a formality) was taken and the brand "Thinkpad" was transitioned to Lenovo ownership. IBM continues to be a company providing services to government and industry, as it has since its founding.
HP, on the other hand, is a company whose roots are in technical instrumentation and excellence in test equipment. Over time, this resulted in innovations such as the HP 9100A, the familiar tried-and-true HP calculator line, its superb printers, and so on... all outgrowths of HP's core roots in engineering and instrumentation.
The spinoff of Agilent was like HP cutting off its right arm. To add insult to injury, the company was forced to digest the Compaq acquisition at the same time. Still, the core mission of creating excellent electronic machines survived and HP is in a dominant position when it comes to providing reliable hardware in the form of computers, servers, printers from laserjets to industrial presses, networking, etc.
With that as a basis, the move into consulting services and enterprise software makes sense, but a move as unforgivably idiotic as removing the PC business would cut the very legs out from under the business, regardless of what some P/E number on a spreadsheet says. Why would an enterprise come to HP for consulting when it cannot provide a package of desktops, servers, and software? That is HP's mission as it is configured now, with Agilent gone its separate way. It makes sense to push aggressively into new territory, but not to destroy the foundation of the business at the same time.
Apotheker brought no innovative thinking to HP; he merely sought to remake the company in his image and transform it into the SAP that not even SAP would let him create. Whether or not that vision, taken in the abstract, is one worth pursuing is debatable to begin with-- but hacking HP into bits to force it to fit that vision is madness, and the plummeting stock price that you seem to measure value by reflected the market's view of this insanity.
Why is there any need to "bleed heavily"? The PC division is the foundation of the entire edifice. It may not be sexy and it may not fit your metrics-based notion of company value, but it holds up the business and it is number 1 in the world and profitable. That is a strength to leverage, not a "drag".
HP is finally in a position to do exactly what Meg Whitman said it needs to do today: focus on excellence. http://www.ft.com/cms/s/2/d6a4b220-00d8-11e1-930b-00144feabd...
Be that as it may, the differences between IBM and HP are stark in this instance. I-B-M: it stands for International Business Machines. Services to industry are their roots, and those roots run deep. Whether in the form of census punchcards in the 1890s, or ballistics calculations for the military, or the creation of the SABRE booking system, or the creation of relational databases... the list goes on and on and on, but the point is that IBM has never strayed from its roots. It is a business services company.
Upon hitting a rough patch in the early nineties, IBM took radical steps to revive its profits; one of these steps was the introduction and promotion of the business-oriented Thinkpad brand, which was a huge success and helped bring the firm back to health. But that did not make IBM into a PC company any more than the success of the XBox makes Microsoft a gaming company.
After nurturing the brand and working gradually over time with a Chinese supplier to offshore production, the last step (at that point almost a formality) was taken and the brand "Thinkpad" was transitioned to Lenovo ownership. IBM continues to be a company providing services to government and industry, as it has since its founding.
HP, on the other hand, is a company whose roots are in technical instrumentation and excellence in test equipment. Over time, this resulted in innovations such as the HP 9100A, the familiar tried-and-true HP calculator line, its superb printers, and so on... all outgrowths of HP's core roots in engineering and instrumentation.
The spinoff of Agilent was like HP cutting off its right arm. To add insult to injury, the company was forced to digest the Compaq acquisition at the same time. Still, the core mission of creating excellent electronic machines survived and HP is in a dominant position when it comes to providing reliable hardware in the form of computers, servers, printers from laserjets to industrial presses, networking, etc.
With that as a basis, the move into consulting services and enterprise software makes sense, but a move as unforgivably idiotic as removing the PC business would cut the very legs out from under the business, regardless of what some P/E number on a spreadsheet says. Why would an enterprise come to HP for consulting when it cannot provide a package of desktops, servers, and software? That is HP's mission as it is configured now, with Agilent gone its separate way. It makes sense to push aggressively into new territory, but not to destroy the foundation of the business at the same time.
Apotheker brought no innovative thinking to HP; he merely sought to remake the company in his image and transform it into the SAP that not even SAP would let him create. Whether or not that vision, taken in the abstract, is one worth pursuing is debatable to begin with-- but hacking HP into bits to force it to fit that vision is madness, and the plummeting stock price that you seem to measure value by reflected the market's view of this insanity.
Why is there any need to "bleed heavily"? The PC division is the foundation of the entire edifice. It may not be sexy and it may not fit your metrics-based notion of company value, but it holds up the business and it is number 1 in the world and profitable. That is a strength to leverage, not a "drag".
HP is finally in a position to do exactly what Meg Whitman said it needs to do today: focus on excellence. http://www.ft.com/cms/s/2/d6a4b220-00d8-11e1-930b-00144feabd...
I agree. HP's hardware business is dragging down its stock price. this is one of the reasons why IBM sold off its PC division to Lenovo. Services and software usually provide a return on invested capital of 30 percent or more, compared to 15-20 percent for hardware.
IBM's ROIC is currently at 34.1% compared to HP's ROIC at 16.2%. After IBM sold off its PC division to Lenovo in 2005, IBM's ROIC grew from 17.75% in 2006 to 29.55% in 2010 with a 5 year average of 27.6%.In comparison HP's 5-year average ROIC is only 15.9%.
HP wanted to do the same thing IBM did 7 years ago. The big difference was that before selling off its PC division, IBM already had a strong software and services business (generating half of its revenue). they also bought PriceWaterHouseCoopers' consulting arm in 2002. HP's software and services business isn't nearly as strong, even after buying Autonomy so they got clobbered by analyst and the media.
IBM's ROIC is currently at 34.1% compared to HP's ROIC at 16.2%. After IBM sold off its PC division to Lenovo in 2005, IBM's ROIC grew from 17.75% in 2006 to 29.55% in 2010 with a 5 year average of 27.6%.In comparison HP's 5-year average ROIC is only 15.9%.
HP wanted to do the same thing IBM did 7 years ago. The big difference was that before selling off its PC division, IBM already had a strong software and services business (generating half of its revenue). they also bought PriceWaterHouseCoopers' consulting arm in 2002. HP's software and services business isn't nearly as strong, even after buying Autonomy so they got clobbered by analyst and the media.
Splitting off HP's hardware business doesn't suddenly make it worth the same as Apple's
That's like claiming if it spun off it's discount coupon business it would be worth the same as groupon.
That's like claiming if it spun off it's discount coupon business it would be worth the same as groupon.
He did provide PE ratios for competitors as well, and HP is the largest PC maker. He isn't valuing them the same as Apple, just that the PE ratio should be similar.
The line of reasoning applied here escapes me. In what way are the hardware and consulting business lines distractions to one another? It's like saying a car company's manufacturing business is going to get distracted by the company racing team, because it's possible to draw up different P/E ratios for the two. This overlooks the fundamental and inextricably interlinked business relationships between the two. And it casts aside all kinds of follow-on benefits, such as market & mind share, the halo effect, cross-pollination of new business ideas and seeding of innovation.
First good decision they've made in a while. Too bad they are unlikely to reverse the WebOS decision.
I have to wonder how much this had to do with not finding anyone to buy it at a price they were willing to take.
I have to wonder how much this had to do with not finding anyone to buy it at a price they were willing to take.
Will they keep WebOS?
Unlikely. Besides the fact that almost no one actually has any faith in it as a platform due to the way HP dropped it, even if they did do a 180, people would still have shaken confidence.
Not to mention that there are currently no currently officially selling WebOS devices (except for a few straggling phones in the discount bin), nor plans for new ones.
And, when your competitors are Android, WP7, and iOS, getting over the vicious cycle of "no developers making apps which means no people are buying apps which means that no developers are making apps..." is just too much. Even Android was struggling with that and still is on the tablet side even with the Google juggernaut behind it.
Plus, even in printers and lower end devices and phones like that, WebOS is overkill. Samsung's Bada and Android are crowding that market too tightly, not to mention Symbian.
Maybe we'll see WebOS as an "instant boot" option on a few HP PC models for which it was already in development but that doesn't really count.
There's no future for WebOS. It's dead. When your competitors are Microsoft, Google, and Apple, and they already have entrenched hardware and software products in the same market that are innovative and being actively developed, and are directly competing against yours, and are having far more money pumped into them, and have thriving ecosystems, and haven't been officially been killed off, you may just be best off going home.
Not to mention that there are currently no currently officially selling WebOS devices (except for a few straggling phones in the discount bin), nor plans for new ones.
And, when your competitors are Android, WP7, and iOS, getting over the vicious cycle of "no developers making apps which means no people are buying apps which means that no developers are making apps..." is just too much. Even Android was struggling with that and still is on the tablet side even with the Google juggernaut behind it.
Plus, even in printers and lower end devices and phones like that, WebOS is overkill. Samsung's Bada and Android are crowding that market too tightly, not to mention Symbian.
Maybe we'll see WebOS as an "instant boot" option on a few HP PC models for which it was already in development but that doesn't really count.
There's no future for WebOS. It's dead. When your competitors are Microsoft, Google, and Apple, and they already have entrenched hardware and software products in the same market that are innovative and being actively developed, and are directly competing against yours, and are having far more money pumped into them, and have thriving ecosystems, and haven't been officially been killed off, you may just be best off going home.
I'm sure you could find dozens of articles from 1996-1998 saying similar things about Apple, but imagine how different the world would be if Jobs listened to them and just declared Apple "dead" and didn't return to the company. WebOS is a great platform and it's not too late to save, but it needs a better company than HP to breathe new life into it.
In my opinion, it's much better than iOS for tablets and larger devices (the perfect TV?) but the clock is ticking. Every day HP wastes with decisions like "should we kill one of our largest sources of revenue?" Apple is right next door developing amazing products for tomorrow like Siri.
In my opinion, it's much better than iOS for tablets and larger devices (the perfect TV?) but the clock is ticking. Every day HP wastes with decisions like "should we kill one of our largest sources of revenue?" Apple is right next door developing amazing products for tomorrow like Siri.
In fairness, HP never proposed to "kill one of its largest sources of revenue". The idea was to get some cash by selling or spinning off a relatively low-margin division. Killing it would be ridiculous. IBM certainly didn't "kill" its PC division; Lenovo is now the #2 vendor.
While IBM wasn't nearly the world's biggest PC maker as HP is right now, I would like to see a similar deal happen with WebOS. Lenovo has proven to manage the thinkpad line better than IBM[1].
[1] http://www.tmcnet.com/topics/articles/229026-hp-remains-bigg...
[1] http://www.tmcnet.com/topics/articles/229026-hp-remains-bigg...
webOS doesn't have a steve jobs, or else it might still be around.
Agreed. That's why I would love to see it in the hands of Bezos and team.
The big difference here was that the Mac had been around for ten years, had a big user base (even if small relative to windows) and sustainable compelling advantages over its competitors (best versions of most graphics apps, only versions of some, many unique media apps (e.g avid, protools), real multiple monitor support, system level color management). If WebOS had ten years of history and a bunch of industry leading apps on it the analogy might be stronger.
WebOS has suffered from severe performance and stability problems for three years, with no solution in sight.
This was demonstrated both when the WebOS application layer received a 2X performance boost when ported to WebKit on iOS, and again when Android was ported to the TouchPad hardware and was found to be quite a lot faster than WebOS.
It's quite clear that it is a fundamentally flawed architecture without a future. It's too bad; there's some interesting stuff going on in the application layer, but the underlying OS is a complete turkey.
This was demonstrated both when the WebOS application layer received a 2X performance boost when ported to WebKit on iOS, and again when Android was ported to the TouchPad hardware and was found to be quite a lot faster than WebOS.
It's quite clear that it is a fundamentally flawed architecture without a future. It's too bad; there's some interesting stuff going on in the application layer, but the underlying OS is a complete turkey.
It was not "WebOS Application layer" that was ported to WebKit on iOS, it was a simple Enyo app running. WebOS is a great OS. I have a Nexus S and an iPhone but I still use my old Palm Pre2 because I think the usability of WebOS is far greater than iOS or Android (and I am a developer for both platforms).
People tend to dismiss WebOS without ever touching a device. Yes, my Pre2 is not as fast as my Nexus S but guess what, for my daily tasks of emailing, web, agenda, evernotes and ebooks it is GREAT! The OS has a better experience and the development framework rocks. Enyo is wonderful, I wish it was open source.
You speak of a flawed architecture, I just see a beautiful system with a wonderful paradigm (the cards) that is aesthetically pleasing and a joy to develop for. If I could get my hands on a Pre3 or a TouchPad, I would buy it instantly but unfortunately, they are not available here.
People tend to dismiss WebOS without ever touching a device. Yes, my Pre2 is not as fast as my Nexus S but guess what, for my daily tasks of emailing, web, agenda, evernotes and ebooks it is GREAT! The OS has a better experience and the development framework rocks. Enyo is wonderful, I wish it was open source.
You speak of a flawed architecture, I just see a beautiful system with a wonderful paradigm (the cards) that is aesthetically pleasing and a joy to develop for. If I could get my hands on a Pre3 or a TouchPad, I would buy it instantly but unfortunately, they are not available here.
Agreed (as a former Pre user).
I think they should rip out whatever kernel they're using and replace it with BeOS, which has wonderful real-time and multitasking behavior.
I think they should rip out whatever kernel they're using and replace it with BeOS, which has wonderful real-time and multitasking behavior.
[deleted]
HP has clearly shown they are not good caretakers of WebOS. They best thing they could do is sell it off to someone who could make better use of it. Amazon? Although with the launch of the Fire, they're pretty much stuck on Android now...
I don't see why they're stuck on Android. The Android part is pretty hidden and if Amazon has shown an ability to do anything, it's to make wholesale changes without burning the place down. They also can sit on a property until they are ready for it (see: Slow integration of Audible, Goodreads). Indeed, it's possible they would like to get off Android to avoid being beholden to Google.
What would Amazon gain from purchasing webOS from HP? I don't see much webOS value for Amazon except Palm patents (to defend the Kindle Fire from Apple patent attacks). Amazon has invested in their own Android App Market and then the Kindle Fire. They have the talent and money to support their own fork of Android (which seems like a possibility) if Google were to stop open-sourcing Android.
Few days on, but I see it similar to how Google felt the need to make Chrome rather than to simply rely on Firefox. If you're selling a property (in this case web services and advertising), wouldn't you want to control every aspect of how that property is viewed? Google wanted to have full control over how users saw their product, so they can make a browser and fully support that browser with all the bells and whistles their product can conceivably offer through that platform. Amazon is the same way. Their device is secondary to the content they are offering, so why not be able to tailor that device fully to the content. The only way you can ever truly make that a reality is if you have your own platform.
Of course, even if this is all wrong, it’s not like WebOS will cost that much money. It’s like Amazon picking up a book at the bookstore, it looks interesting, you probably won’t ever read it, but it looks pretty and doesn’t take up space and you can send it off to the thrift store in a couple of years.
Of course, even if this is all wrong, it’s not like WebOS will cost that much money. It’s like Amazon picking up a book at the bookstore, it looks interesting, you probably won’t ever read it, but it looks pretty and doesn’t take up space and you can send it off to the thrift store in a couple of years.
This decision is better than their CEO pick (meg whitman) but these big decisions affect each other... I don't see much future but decline for HP
Kinda makes me like Whitman more, though. Wish she'd been around before the WebOS disaster.
The only credit I give Whitman for this is that she realized that the markets (both PC customers and the stock market) had already spoken, and they did not like the spinoff plan. Analysts had already pointed out that existing synergies (the supply chain, etc.) would be lost. I think it was pretty much a foregone conclusion that the spinoff decision would be reversed, although I'll grant Whitman the benefit of the doubt and assume that she really did study the question deeply and with an open mind.
I doubt she would have reversed the WebOS decision even if she had had the chance. As much as we techies may bemoan it, the fact is that for HP to see any profit from the Palm acquisition, it would have had to suffer losses for several years and then try to recoup them in an extremely competitive environment (read: low margins). I think the real mistake there was when Hurd bought Palm in the first place, and I see no evidence that anyone in HP's upper management thinks otherwise.
I doubt she would have reversed the WebOS decision even if she had had the chance. As much as we techies may bemoan it, the fact is that for HP to see any profit from the Palm acquisition, it would have had to suffer losses for several years and then try to recoup them in an extremely competitive environment (read: low margins). I think the real mistake there was when Hurd bought Palm in the first place, and I see no evidence that anyone in HP's upper management thinks otherwise.
Personally, this fiasco seemed to me to mirror Netflix's recent missteps, just with far less press.
"You know what HP should do? They should acquire Netflix. Then a week later back away and say “Never mind.” Then a month later go ahead and buy Netflix. Those two are made for each other."
–John Gruber
–John Gruber
Although my testimony is likely not worth much, I feel it's important to convey why I think HP's PC division is worth keeping around.
My boss' HP desktop died, he brought it to me to see if I could fix it quickly, and I went through the steps on HP's website to "troubleshoot" it. I was pretty sure the power supply was dead, and I sent an email to support explaining all the steps I went through to determine that. There was an option on the page to list experience level, and I put it at the max.
The first response I got was that they would send a shipping box for it and that they would replace the PSU.
They 1) trusted their customer and 2) didn't back and forth, wasting their time and mine.
I got the box within a few days and returned the system to HP. It was back within 3 days (this is a week total from initial contact to returned system), and the hard drive wasn't even reformatted.
This is the kind of service that I am used to from Apple (fix it and forget it), and it renewed my hope in HP, but this was a little over a year ago, so who knows what's going on now.