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Brier Dudley's blog

Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

August 18, 2011 at 12:57 PM

Is HP off the rails? Latest flip-flop kills tablets, dumps PCs

Hewlett-Packard, the world’s largest PC maker, just announced that it’s looking to spin off its PC business and killing off the Web tablet it launched a month ago.

This comes a year after HP spent $1.2 billion buying Palm and its webOS business, so HP could have its own operating system and build its own developer ecosystem, instead of using Windows’.

Chief Executive Leo Apotheker — who joined HP in November after a career at business software giant SAP — is playing to Wall Street and converting HP into a higher-margin, enterprise company.

It looks like he’s copying IBM, which sold its PC business to Lenovo in 2004 so it could focus on business servers, software and services.

From the executive suite, HP’s move may look decisive and maybe it will pay off in the long term.

But from a distance it looks like more wild directional changes at a storied company that has lurched back and forth in search of a strategy under a series of challenged chief executives.

The only thing consistent about HP lately is its apparent hatred of Microsoft.

Carly Fiorina abandoned HP’s storied culture and laid off thousands to appease Wall Street. Along the way she cozied up to Apple. She was replaced by Mark Hurd, who was shown the door after fudging expense accounts to cover dates with an actress. Hurd was pals with Microsoft’s nemesis Larry Ellison, and now works with him at Oracle.

Before he left, Hurd bought Palm and its operating system, enabling HP to begin weaning itself from Windows. Hurd also named Netscape co-founder Marc Andreessen to HP’s board in 2009.

Now, by turning HP into an enterprise software company like IBM and Oracle, Apotheker’s making HP even more of a competitor with Microsoft.

As part of this new emphasis, HP is spending $10 billion to buy Autonomy Corp., a British company that makes software companies and governments use to search and analyze their data.

The planned PC spinoff and Autonomy purchase were announced along with HP’s earnings during the third quarter. It netted $1.9 billion on sales of $31.2 billion – a 9 percent increase in net profit over the same period the year before, and a 1 percent increase in sales. Its release noted that consumer sales were down 15 percent and its business sales were up 5 percent.

HP’s personal systems group netted $567 million on sales of $9.6 billion, compared to a profit of $469 million on sales of $9.9 billion a year ago.

Apotheker arrived during a low point in the cyclical PC business — after the rush of netbooks and initial burst of Windows 7 upgrades, at the peak of the computer industry’s iPad envy.

The next PC upgrade cycle is just around the corner, with Windows 8 and new mobile hardware.

But HP decided a year ago that it could do better going its own way, with webOS and devices like its TouchPad, which has been a flop.

Instead of sticking with its new computing platform strategy, though, HP’s dumping it the month after its flagship product launched.

And instead of trying to get back in sync with its PC industry partners, HP is throwing in the towel with its personal system business.

HP will presumably sell its PC business to one of the Asian manufacturers. There will still be plenty of options for consumers and businesses who will continue buying hundreds of millions of PCs a year.

That will leave Dell as the last major U.S.-based manufacturer of Windows personal computers.

Meanwhile, thousands of HP employees – including many in the Northwest — are in limbo, and the PC industry is losing another one of its pioneers.

One more thing: Wall Street types often call on tech companies to split apart and divest slower business groups. HP’s doing just that, but investors responded today by ditching its stock: It fell 6 percent in regular trading and another 10 percent after hours to $26.61.

Comments | Topics: HP, Microsoft, webOS

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