Heads are rolling at Hewlett-Packard Co. (NYSE: HPQ), as new CEO Leo Apotheker moves to streamline the organization and generate it deeper into company software, cloud computing, and services.
Apotheker took over in September, subsequent the ouster of Mark Hurd amid a sexual harassment scandal. He hasn't experienced very much of the honeymoon period, spending his preliminary times at HP wanting to stay away from getting drawn into an intellectual-property theft trial by which Oracle was suing his past employer, SAP.
Early on, Apotheker do make some tone about elevating the significance of software, but relatively frankly, many observers (myself included) took that getting a assertion from the software-centric executive who hadn't however in actuality acclimated himself toward very much more hardware-oriented HP.
So it arrived as a thing of the shock how forcefully Apotheker has swung into actions over the previous week. The catalyst appears to can be found to be HP's good-news/bad-news financial picture.
On the as well as side, HP last day reported stable fiscal second-quarter results: income of $31.6 billion was up three % year-over-year, and net income of $2.3 billion was up 5 % for that exact period. Unfortunately, HP nevertheless obtained dinged by Wall street on account of bad PC income -- right down 5 % for that quarter -- and for minimizing its fiscal third-quarter and full-year outlooks as a end result of ongoing softness in income of customer PCs and decreased revenue expectations for its companies business.
Yet Apotheker was apparently at current at purpose addressing that softness using a dose of cost-cutting, based on some leaked may nicely 4 memo by which he wrote, according toward Wall street Journal, "We should check out just about every penny and decrease all hiring."
That memo, and Apotheker's shakeup of HP's executive ranks -- three senior vice presidents, which consists of networking mind Marius Haas, are reportedly departing -- exhibits the fact that new CEO has initiated a hands-on program correction.
If all this seems a complete great offer like what's been happening recently to Cisco we shouldn't be surprised. Challenging financial occasions -- we are in an exceptionally recovery but not completely recovered -- positioned particular stresses inside the tech giants. (See my prescription for 4 actions to revive Cisco: As Embattled Cisco Shutters Flip, very much more Cuts Are Certain.) regrettably for Apotheker, whose earlier reign as president of SAP was adjudged much lower than a success, he's not on the way to acquire very much time to appropriate the ship.
So what should he do? the way in which I see it, HP's troubles are relatively straightforward to identify, however challenging to fix. Like everyone else, it's caught amid the changeover to some post-PC world. regardless of whether the brand new era will in actuality be all cloud, each of the time, since the hype would possess just one believe, I think we are able to concur that software/infrastructure/platform (and what ever else you need to contact it) as-a-service is very much over a passing fad. It's on the way to can be found to be the method of delivery for just about any large portion of company computing in the future, and most most likely for a lot of customer services, too.
What helps make factors tougher for HP, as in comparison to, say, IBM Corp. (NYSE: IBM), may be the actuality that HP persists to be heavily reliant on PC sales. (IBM marketed away its PC division to Lenovo in previous due 2004.) As Apotheker positioned it to financial analysts last week: "Even although our customer PC expectation have been cautious, the steepness of our Q2 decline is higher than what we experienced anticipated."
It's ironic that HP, a organization that developed its bones innovating in evaluate equipment, microwaves, and minicomputers, has can be found to be so synonymous with commodity companies like PCs and printers. Overreliance inside the past is recognised getting a legacy of Carly Fiorina, who purchased Compaq for $25 billion in 2001.
Apotheker now appears to can be found to be getting a web site from IBM's e book of the decade ago, by looking toward higher-margin companies organization getting a method to offset weakness in low-margin PCs. Here's what HP's second-quarter earnings press discharge experienced to say about services, which in Q2 grew two % year-over-year in revenues using a 15.2 % working margin:
"To enhance long-term performance, HP is accelerating alignment in the companies organization using the company's all round strategy, which consists of producing investments to generate very much more value-added options and migration toward cloud."
I should be aware that HP carries a seem company computing technique with which to compete versus IBM, Dell, and Oracle (Oracle now owns the server organization of sunlight Microsystems). HP also carries a stable networking play, using the kind of the organization it previously referred to as HP Procurve but is now bringing below the HP brand.
I point this out as a end result of the actuality just one can't possess a effective companies organization not getting reselling the company computing, storage, networking, and computer software pieces in the equation. You need that "real" stuff which means you can surround them with consulting companies -- assisting businesses buy, install, and effectively use everything.
HP has all this. But whatever you may nicely get from my lengthy disquisition may be the actuality that what HP's been lacking is merely clarity of branding, purpose... and just what it is and does. Which signifies it's as very much as Apotheker to create HP simple, if it's to realize success using the soon-to-be-here post-PC future.
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