Monday, September 10, 2012

HEWLETT-PACKARD: NEW CEO

The New CEO is a Software guy and has Prior Experience only in Enterprise Sales – A clear mismatch with the current philosophy of HP – The largest IT company in the World. Is he the right choice? 

From ethics to business. While at SAP, Apotheker helped build a global software enterprise sales unit. B2B was his frontier. He headed various divisions and revived SAP’s R&D platform, and kicked-off a glorious run of 18 quarters of double-digit software revenue growth, which ended in 2009. The agony for the hopefuls is that, at HP, none of these credentials will play the cushion. He is not known to be a people’s man – a fact which will not help inspire HP’s 30,000 employees, who have not been in the best of spirits under Hurd’s reign. To prove this, as per Thomson Reuters, HP’s revenue and net profits per employee for FY2009 stood at $406,335 (97.11% less than that the industry’s) and $28,405 (93.08% less than the industry’s) respectively. Says Sturm of EMA, “The immediate challenge facing Apotheker relates to employees. It is imperative that he takes immediate steps to improve employee morale & control key employee turnover. If he cannot do these, then his tenure with HP will be brief.” While HP is known for its hardware, distribution and B2C business, software is more of loose change (accounting for 2.8% of HP’s topline for Q2, 2010). And this is precisely what Apotheker has set out to repair. Expectedly, under him, HP’s focus on software will increase manifold. But with software, comes innovation. And Apotheker’s SAP files prove him a failure at it. Also, he has earned a reputation for establishing an environment at SAP, which focusses on high-cost and low return maintenance and support pricing, rather than profitable applications, despite the billions spent on innovation. The fact that he has also presided over product delays and has demonstrated ill-sense of pricing techniques (he angered SAP’s customers by increasing prices during the slowdown), also does not ensure better days ahead for the mass-pleasing HP; the foreboding danger being a repetition of what happened to SAP – HP might soon find competitors chiseling away its PC market share, a process which has already started. (HP’s global share during Q3, FY2010, stood at 17.5% vis-a-vis 19.3% in FY2009).

So what should Apotheker do? He has options. The most irresistible one will be not to tamper with HP’s pride – its hardware business – which he will, despite knowing that Hurd tried to give HP a software and enterprise business edge with its acquisitions of EDS, 3Com and Palm. But neither did the $13.9 billion EDS acquisition help HP make waves in the consulting & services business (where IBM is #1), nor did the $2.7 billion 3Com buy manage a dent in the network arena where Cisco rules. And as for the $1.2 billion Palm buy, everyone knows what an HP smartphone looks like (!).

Many claim that Apotheker might do to HP what Sam Palmisano did to IBM. But the truth is – the very imagination lacks logic. HP is not IBM. When IBM chose to go the software way, it was being sucked into a black hole, with its hardware business collapsing. It was then that IBM decided to shed the deadweight of its hardware unit. HP is in not in a similar situation by lightyears! It is the #1 IT company in the world (having made $114.55 billion in revenues in FY2009) and sells the largest numbers of PCs and printers in the world (claiming 37% of global market share in the printer segment as of Q3, 2010). What makes Apotheker believe that HP needs a makeover?

Whether he will take a dig on cloud computing is a wonder (as he has had his share of expensive failures in this regard while at SAP, burning $5 billion in two years), but what is inevitable, is that HP under Apotheker will join the battle to capture the enterprise space from the likes of Oracle and IBM. This would call for expensive acquisitions of players like SAP, Salesforce.com, et al, which will put big question marks on the ROI figure of HP, that is already lower than the industry’s (12.36 and 15.56 respectively).


Source : IIPM Editorial, 2012.
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