The new HP way, the day after

It took HP less than two months to dump the TouchPad. It’s taking investors no time at all to dump their shares in HP, which also is thinking about dumping the PC. Hewlett-Packard shares are tanking 20 percent to about $23.60 as of this post, losing one-fifth of their value.

After all is said and dumped, questions remain:

Is webOS finally dead? Is this the PC-pocalypse?  Can HP emulate IBM and thrive post-PC?

Before HP made its big announcements yesterday, some word had leaked out a couple of hours before: HP is exiting the PC business, and is buying British software company Autonomy for $10 billion. The third bombshell solidified the company’s shift from targeting consumers to betting on enterprise: After less than two months on the market, HP is sending its TouchPad tablet to an early grave, to a cemetery populated by Microsoft’s Kin and other flops such as Apple’s Lisa and IBM’s PCjr.

In doing so, HP seems to be throwing away its $1.2 billion acquisition of Palm last year, although the company says it might license webOS, the operating system that many think could survive if paired with the right hardware maker. For example, Samsung and HTC might be looking for an alternative to Android in the wake of Google’s planned purchase of Motorola Mobility. But Ina Fried at All Things Digital says licensing webOS might be easier said than done, because HP would need to continue supporting webOS, and it has not shown the “stomach to be in the mobile game.” If HP decides to sell its webOS unit instead, ZDNet’s Jason Perlow suggests RIM, maker of the BlackBerry and the PlayBook, as a possible buyer., the online retailer that’s rumored to be working on a tablet, is also being floated about as a company that might be interested in webOS.

By exploring the spin-off of its PC business, the world’s biggest PC maker is conceding that the “post-PC world” popularized by Apple’s iPhone and iPad is here to stay. Smartphones and tablets have captured the computing masses’ imagination, and there’s no turning back. Still, even as Android smartphones and Apple iPads chip away at the traditional PC’s dominance, one way to look at the demise of the personal computer is to realize that it isn’t really dying — it’s evolving. There will be personal computing. It just might not look the same.

For now, though, the traditional PC is yet to be dead and buried, hence the talk about which manufacturers might want HP’s PC business. Analysts say China-based Lenovo (which swallowed up IBM’s PC business more than five years ago) and South Korea’s Samsung are possibilities, according to Bloomberg Businessweek, which also mentioned other hardware manufacturers such as Acer and Foxconn. Because making PCs is low margin, it makes sense that the talk is revolving around Asian companies.

Will CEO Leo Apotheker‘s strategy, which is being compared to IBM’s shedding of its PC unit, work to transform the company? Analysts quoted by the Mercury News seem to believe it will have long-term benefits, saying it will turn HP into “a smaller, faster-growing and higher-margin entity,” which is what investors want. But perhaps investors didn’t get the memo, because they’re dropping HP stock like a hot potato. It’s hard to blame them. ZDNet’s Larry Dignan points out that HP faces different challenges than IBM did, and chief among them is that IBM was not facing a post-PC world when it got out of the PC business.

Other reasons investors might be nervous: Apotheker is essentially undoing Carly Fiorina’s legacy — HP’s $19 billion purchase of Compaq a decade ago helped propel the Silicon Valley company to the world’s No. 1 PC maker — after initially touting the company’s position as an advantage. Apotheker had also touted the TouchPad, of course, and other HP executives had said earlier this year that the smartphone and tablet race was “at the beginning of a marathon, not the end of a sprint.” (See Quoted: HP puts running shoes on as Apple, Google complete their first mile or two.) While some may view HP management’s flip-flops as a positive — willingness to admit miscalculations and make difficult decisions to find a long-term fix and all that — it looks like some investors wary of the massive restructuring charges to come are wary of the new regime, and perhaps wondering if HP has lost its way for good.

So many more questions remain, many of which we’ll be sure to explore in the coming days. Among them: How does this massive strategy shift by one of computing’s biggest players affect other tech companies? Where do HP employees go from here? And how much time will Apotheker get to prove that his strategy will work?


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  • TonyW

    HP is King Midas in Reverse, especially where software is involved. WebOS and Palm is just the latest example of HP’s unique ability to destroy value, witness the PocketPC/Jornada, Verifone, Bluestone Software, Mercury Interactive, and more. And it takes an HP to take the value of Her Worship’s prized Compaq acquisition and turn the product into tech junk, the Yugo of the PC industry.

    Autonomy customers should start now to look for alternatives, because the acquisition would only leave 12-18 months before the top Autonomy talent moved on, HP tired of its shiny new acquisition, and put the products on “sunset” status, “supported” by a team in Bengaluru.

    Investors are fleeing because there’s no obvious upside for HP, and they have no viable play in either mobile or cloud computing, the two most obvious directions for the tech future. If they are going to go up against IBM and other system integrators, that’s fine, but it’s a labor-intensive business that doesn’t command much of a multiple in the market.

  • Markus Unread

    “HP: Our Core Competency is Mismanagement.”

    I can hear the Exec’s now – “We’ll be a software-only company. No manufacturing costs!”
    “We’ll be a cloud company, whatever that is. I hear it’s hot in the business space.”
    “We’ll be a big-iron company. There’s wider margins.”
    “How about just selling IP? Then we can layoff all our employees!”

    What Would Dilbert Say?

  • HP sucks. I purchased a dv9700 series notebook back in 2008 that lasted all but a year and a half after the cooling system failed to properly ventilate the components and caused my graphics chipset to fry on my motherboard. I spend countless hours working with the stupid technical support in Fremont California, and those boobs failed to repair it. It was a horrible product. I’m not saying that Apple or the other makers don’t have their problems, they do. For example, my brand new Apple MacBook Air experienced a sticky shift key, and the whole keyboard and top cover had to be replaced less than six months into using it. My Sony VAIO experienced touchpad hardware failure and the component had to be replaced. The difference with these two companies is that Apple did a great job fixing my MacBook which I just had to drop off at the Apple Store; and Sony sent a technician to my home and he fixed it perfectly. So the problem with HP was mostly their poor customer service and technical support.

  • dermbuilder

    At the time that HP bought them, Compaq was building mostly crap computers. I was a system builder at that time and lots of my customers brought in Compaq systems with problems and when I took the time to show them the shortcomings of their systems compared to Whitebox equipment like Asus motherboards they invariably had me build them new systems. Even today I say that ALL brand name desktop systems are junk when compared to custom built. Asus motherboards all carry 3 year warranties, all good hard drives do as well, and all microprocessors do as well if bought as retail products. DVD burners usually don’t, but a good DVD burner only costs about $25, so if it breaks after a year, just buy another. Really good laptops from the likes of Toshiba cost as little as $400, so why bother with HP.

  • dinosaur

    HP has been a 20 year train wreck, in slow motion. HP never really got over Dave Packard stepping aside (which happened circa 1990). HP frittered away the 90s and largely missed the internet revolution, then brought on the truly evil Carly, she of only 2 talents – shameless self-promotion; and running companies into the ground. Then came Mark Hurd, a good operations guys with no apparent interest in strategy – good at wringing blood from a turnip but not good at growing turnips. Finally we have Leo, truly out of his depth.

    After 20 years of profound mismanagement we are left with the wreckage of a company which was once truly great. How sad. And the wrecking crew all paid themselves fat bonuses for doing such a great job.

  • For those who don’t remember history (and are thus doomed to repeat its mistakes), HP was the first to use the term personal computer, for their own mobile pocket computer, in early 1974. Now, I will bet you can’t find 3 people at corporate HP who know that.

  • Did I forget? HP was the first electronic tech company a la Silicon Valley (1939), the first to make a single-user computer workstation that you could take home and plug in (1966), the first with a pocket computer (1974), the first with a DOS laptop (1984), first with a consumer laser printer (1984), and 100 other things I can’t list. And now the tech giant has been Carly’d into a pathetic shell of its former self, needing only a Gordon Gekko to put the stake to it so it can’t bite anyone else.

  • Markus Unread

    Thank goodness Agilent has been long parted from the HP mess. They still have a bit o’ the old HP in ’em.

  • wheeler

    Some people are snatching them up in dozens from Walmart B&M 16gb and 32gb for $129 and $149 respectively : OD offers them periodically and, allegedly HP small business still sells them at the old price but you can contact to get a price adjustment There’s also talk of porting android to this thing, that would be huge.

    Currently, is showing a link to eBay where you can buy the 16gb model!

  • I don’t that the Compaq investment was wasted, just used up. There will continue to be a need for laptops and for desktops but it is no longer the big deal it once was. Unfortunately, HP seems to have a history of not understanding what potential jewels they have and how to make them pay off.

  • I don’t know where to post this suggestion so here goes: Why doesn’t HP give all of its tablets to underprivileged school kids instead of poisoning a landfill either here or in Asia.

  • sd

    @Jim, I would posit that HP does understand what potential jewels they are purchasing (that’s why they go after them). But whatever HP buys soon gets smothered by a company which hasn’t “gotten” customer service since Bill and Dave left and which stresses cost-cutting beyond reason. The entrepreneurial spirits that fostered the Compaqs and Mercurys and made them so attractive to HP just suffocates under a pigpile of cost-obsessed management and a bureaucracy so large that nothing gets done well.

    The jury still is out on Apotheker, I think, but he’s got an uphill climb to persuade the existing BoD — most of whom created this mess — that software is the way to go. If software is the way to go, it has to be current and fixed and useful to customers. Just resting on being “the industry standard” didn’t work for Lotus 1-2-3, didn’t work for Novell, didn’t work for WordPerfect, and isn’t working for Microsoft Windows. HP could be starting their slow ride into history.

    @winton, I’m guessing HP would rather bulldoze a few hundred thousand iPads than be on the hook for any support. Support costs money; at least for HP it does not generate it. Don’t look for them to do anyone favors.