HPQ and Product Cycles
If I told you that HPQ had 349,000 employees at last report would you be surprised? I did not attend HP’s analyst day this past week, but I did read a few of the headlines with surprise. Here are few that I thought were noteworthy:
- HP CEO Whitman says company is now a diversified IT company
- HP’s CEO: We are number 1 or 2 in each of the major markets
- Hewlett-Packard CEO cites management changes as slowing down company
- HP’s Whitman says turn around will take time
On CNBC the day after:
- Hewlett-Packard CEO Whitman says ‘very comfortable’ with make-up of board
- Hewlett-Packard CEO Whitman: I don’t think company is too big
I have written a few times on my blog about HPQ. The last entry of note was over a year ago in September 2011 here. At the time I wrote “This is an interesting chart when you consider that it is framed by $25B for Compaq in September 2001 and the iPad shipping in January 2010. Assume for moment that the credit crisis did not happen and the chart is down a bit in 2008 and then peaked in 2010. HPQ acquired EDS in 2008. They did this because they were believing in the ongoing propagation of Moore’s Law and the enterprises would consume more network infrastructure and having the ability to influence or control the decision making process in regard to that consumption was a good position. Kind of interesting that the peak in HPQ equity coincided with launch of the iPad, which marks an important transition point for the PC market in the same manner that the iPhone marked a transition point for the mobile device market.”
In November 2011, I wrote the following on HPQ “Meg Whitman, CEO of HPQ on CNBC: I think companies should give Y/Y guidance only and report a monthly set of numbers, which would be a subset of financials and unaudited. I think this would take a lot of emotion out of quarterly results as well as the channel check drama. With that said when companies stop giving guidance or provide less transparency, I do not see how this is helpful and I sell or short the stock until I can trust the management team. I listened to Meg Whitman’s comments on CNBC yesterday. She said there was a lot of complexity and cost in HPQ and she wants to strip it away and simplify the company (my take away from her talking points). Leo was there 9 months, so did all this cost and complexity come from him or did Hurd oversee it? I viewed Hurd was an acquisitive cost cutter and when he was ousted the management team at HPQ was quick to tell investors that Hurd and stripped the company down to the bare bones and there was no investment in innovation and growth. Apparently I am confused.”
Here is updated version of a weekly chart for HPQ going back to the time of the Compaq acquisition. A year later and HPQ is going full on RIMM. I have a colleague at work that has a thesis I have heard him tell many times. His meme is about the large tech companies (e.g. IBM, HPQ, DELL, and OCRL) have been on a binge to become diversified IT companies. If you look at the history of tech acquisitions post the LEH bankruptcy it supports his meme. We joke about every Board Room having a white board full of categories on the Y axis and the big players on the X axis. Management teams are focused on filling in every box: IT services, cloud, storage, networking, tablets, mobile, big data, little data, dumb data, etc.
In terms of HPQ, I think it is good that the CEO is comfortable with the BOD because that has been one BOD full of drama since the Compaq deal. I am not sure investors could take another decade of drama, pre-texting, spying, tattle telling, etc. I am not sure if the CEO thinks the company is too big, too small or just the correct size. I suspect that the leadership team and BOD are all trying to determine what size is correct as well. What I do know is the PC market has turned against the company, printing has gone with it and the EDS business is not a grower. The rest of the business is a just a bunch of parts and they may be 1 or 2 in each market, but they are not great markets. As for being a diversified IT company, whatever happened to the diversified IT companies of the 1970s and 1980s? You know…IBM, EDS, NCR, ATT, Amdahl, CA, Tandem, Wang, DEC and DG. I am not sure being a diversified IT company is a good thing, but as usual I could be wrong.
[Note…it is Monday morning and I already see the break-up, sell off, sum of the parts notes coming out of Wall Street. I would not be buyer on any sum of the parts, break up value or IP value notes.]
* It is all about the network stupid, because it is all about compute. *
** Comments are always welcome in the comments section or in private. **