Senior management at HP are probably wondering what is the noise surrounding about HP saying that they are interested in selling off / reviewing their PC division. It's not like something on this scale wasn't done before. Didn't IBM do it and walked away stronger than before?
I think they need a reality check.
When IBM sold off it's PC division, there wasn't as much noise although it was a major event. But they did it after an extremely long process. Analysts were telling IBM to sell it's PC division since the mid-90s, possibly even earlier. We all now know from the stock market crash, how valuable advice from analysts are. IBM in the past recognized the value of the IBM PC brand and the need to keep that front and center. In front of executives and right in the center of the table. That money losing brand was the 'public face' of the large servers and networks in the data center, where few are allowed to go. The large and
profitable server and networks business and services. This was a time when computers were becoming even more prevalent in business in general, beyond the previous domain of enterprises. Having the brand on the desktop was still important. It says something about your business when you can afford to be using IBM desktop PCs instead of other brands. So it balances out in the end. Lou Gerstner, IBM's CEO at the time saw it's value but realized the inevitable. He put in place the process to split the PC division before he left and it was completed only a few years afterwards.
What made IBM successful is that although they are a large corporation, they understood the process of making sales. The tech guys would come up with great products, the sales people would shake hands and push the products out to the customer, the senior executive would bring the CEO of the customer out for golf. That basic concept of focusing on getting
Job Number 1 hasn't changed even though the products and technology has. In the end, this commitment to the customer is now the main IBM brand, not the PC.
And what tech! Those original IBM PCs were built tough like tanks. I have had IBM keyboards that last longer than the PC it came with. When it came time for them to sell to Lenovo, IBM made sure Lenovo continued carrying on that tradition. I still have old-timers call their Lenovo laptops, IBM laptops (talk about brand loyalty). I don't blame them. The hardware are still built tough. I don't see that kind of brand loyalty with HP. [Full disclosure: I just realized my 4 year-old PC under the table is a Lenovo. Great service: I've had two motherboards and a hard disk replaced on-site with no questions asked]
HP is not chopped liver but my experience with them are still a mixed bag. They make good hardware but the term "good service" doesn't automatically come to mind. It is spotty at best, with some products better supported than others. A tell tale sign? After HP Networking bought 3Com, you have to have a support contract to get access to previously free software or firmware, often the same software that came free on a CD with equipment (which usually is lost within the first few days). Contrast that to the experience accessing HP printer drivers, where software, often updated drivers are free even after the warranty of the product runs out. And guess which one I had to pay more for?
Splitting up is also not alien to HP. HP used to be even more spread out in terms of technology. It used to have business units doing medical imaging, telecommunication networking, semi-conductors and scientific test equipment. These were spun-off into
Agilent Technologies so that HP could focus on servers, storage and computing. Looking at Agilent's history could give a clue as to how HP might look like down the road. Agilent began life as an 8 billion dollar company in 1999. 10 years later, it is worth slightly less. In that time, it has sold off it's medical equipment, semiconductor and network test equipment divisions, focusing on the scientific equipment market. It seems to have a policy on increasingly narrowing it's focus in pursuit of sustainability and profits. Will the to-be-split HP Personal Computing unit become like this? First splitting then shedding it's low-profit computer divisions until all that is remaining is the printer unit? Is this the first step on that road?
Motorola also split into two to allow each company to focus on it's own market. Each are doing well enough. Motorola Mobility is being purchased by Google (for a much more complex reason than purely financial). I am going to take a leap here and say that the Motorola split and the HP-Agilent split was about technology and focus on markets. It is about a company that has too many of them to manage and decided it would be better off to split itself up to focus their resources on their specific markets. This proposed HP split is more about what the direction of the CEO is, not about technology. HP PC division wasn't losing money, just not making enough profit. The litmus test is whether they sell off the printer division. If the split was about technology, it would also sell off the profitable printer division which is in the consumer half of the consumer-enterprise split. They may have to include it as part of the PC division to make it attractive. But why would you sell the goose that is laying the golden eggs? Customers, myself included, will see this as HP turning it's back on us.
HP is not a stranger to bad decisions. Come on, this is
the company that turned down the Woz's Apple 1. But the way that the announcements were made about the fate of the WebOS tablets and the possibility of selling off the PC division is very suspect. You can look at it one of two ways. Either HP was trying to appease the markets by ditching
a low performing unit whose operating profit was 5.7% (and a mere 38 billion in revenue) or
it has been working on it some time ago as part of a broader plan to make over the company into something that the CEO better understands. HP's current CEO is from the financial and enterprise world, previously in SAP. The consumer market is probably something he just doesn't want to deal with.
Like in
my previous post, it really makes me feel old when I see things like this happen again.