So, the year was 1996 and it was the first day of the semester in my programming class at Georgia State University (I was one of those who was able to squeeze a 4 year degree into just 10 years of college). I’m sitting there and this kid I have never seen before comes in and sits down beside me with what I thought was an unusual question…”Hey, what makes the most money in the computer field?” At the time, I knew the DB admins were pretty high on the pay scale so I answered with “Oracle guys make a lot”. He thanked me, promptly dropped that class and went to look for an Oracle class. I also remember him asking me how to spell “Oracle” which he still wrote down wrong. I had been in the workplace for a few years by then and I realized that if you’re in a job you hate, it doesn’t matter how much money you make. In fact, the higher your pay at a job you hate, the more imprisoned you feel. It’s a terrible way to live, if you can call it living.
I never had any intention to blog about HP specifically here, but the announcements they made during their recent earnings call are noteworthy and I wanted to share my take on all of it. When I heard that HP was about to spend over $10B on a software firm, it seemed like Déjà vu and it reminded me of that day in college. To put this into perspective, HP is slated to sell a single line of business that is equal to Cisco’s total annual revenue. This discontent with the status quo is not an uncommon theme for HP, and as I reflected on their last decade, they remind me more and more of that kid in class who was headed out to the latest big thing. Let’s review the last 10 years and the various businesses HP has jumped in and out of and you can decide for yourself what lies ahead…
In 2002, HP wanted to be more like Compaq, so they bought them in what turned out to be HP’s most expensive acquisition to date – a staggering $25B deal. In return, it gave them a better foothold in the x86 server and desktop markets for sure, not to mention it gave them me! Although heavily criticized by many, this move proved to be HP’s biggest acquisition success. HP killed off their home-grown server and desktop BU’s (Netserver/Vectra) and Compaq slowly became the face of HP in these areas (may the mighty Compaq forever rest in peace). If you extracted the printer division out of HP today, I could make an argument that what is really left is almost all Compaq.
In 2006, HP decided they wanted to be more like Cisco and enter the networking business (Procurve was undecided if it wanted to be a part of HP or not at the time). So, HP released Virtual Connect (a product I personally invested many years in at HP) and directly attacked Cisco’s access layer business. This woke a giant that had previously seen HP only as a partner. Cisco responded by entering HP’s backyard with the release of Cisco UCS which has eaten up over 20% of HP’s WW blade revenue since its 2009 debut. Understand your enemies (and your friends apparently).
Between years 2006 and 2008, HP wanted to be more like IBM. This culminated in the acquisitions of Mercury Interactive ($4.5B) and Opsware ($1.5B) on the software side and EDS ($14B) on the services side. The software from these companies has been integrated into new re-branded versions of themselves with an HP-sounding name, but to say that HP has traditionally done well in software would be a falsehood. EDS, the services and integrator giant, required HP to lay off 25,000 employees and they discovered that the only thing EDS could not integrate was itself into HP culture. No one alive would say that HP and EDS have been successful in becoming more like IBM Global Services in this regard.
Also in 2008 HP decided it wanted to be more like Netapp and round out its storage business with some Ethernet-based iSCSI storage. So they bought LeftHand Networks for $360M. This acquisition made good sense for HP and allowed them to really round out their storage portfolio with some solid mid-range products.
In 2010, HP once again wanted to be like Cisco and get into the networking business. So they spent $3B on an acquisition of 3COM. Any success in this strategy is yet to be seen, but they have successfully trained their server sales reps to say “Spanning Tree”, “Port Channel”, and “Cisco sucks” all in the same conversation. I will say this, however – if the current direction of HP is software and services (and that certainly seems to be the theme), networking and competing with Cisco don’t exactly fit in that model.
Also in 2010, HP wanted to be more like Apple and make phones and tablets so they bought Palm for $1.2B (yes, Palm). The once successful iPaq PDA was moved to the bottom shelf somewhere along the way along with its phone counterpart. Fast forward 1 year to August 2011 and HP found that competing with Steve Jobs was so intense that they were going to exit the tablet market and get rid of the much-hyped WebOS that runs it.
Lastly, just days ago in 2011 HP told the world it once again wants to be like IBM and be a big software and services company and announced their intention to acquire Autonomy for almost $12B. It’s easier to be a software company if you can shed $40B of hardware so they seem to be bidding farewell to the PC business. This mirrors the same move IBM made in 2004 when it sold its PC business to Lenovo. The difference is execution – IBM had a buyer lined up and investors didn’t blink at the news (to be fair, IBM’s PC division was only $12B). By contrast, HP had no suitable buyer when they announced and investors exhibited their disapproval with a 26% stock drop – it’s largest since Black Monday in 1987.
As shown in all the above imitations, HP doesn’t have a good track record in morphing their business into new ventures. The current flavor of CEO, Leo Apotheker, is a software man and has competed with the likes of Oracle and IBM for well over 20 years. It’s what he knows and it’s what he does. But competing with Apple and Dell…not so much. There is a lot of good left at HP (and good people) and for the sake of healthy competition, I hope the ship gets straightened out.
Thanks for stopping by…