HP Reinvents Itself For The Post PC Age

Start your day with TPM.
Sign up for the Morning Memo newsletter

Hewlett-Packard, the grandfather company of Silicon Valley and the world’s largest maker of personal computers, unveiled a series of big strategic changes Thursday that indicate just how much Apple has shaken up the world of consumer technology.

The company said in an earnings call that its board is considering selling off its PC business, killing its lagging foray into smart phones and tablet computing, and buying Autonomy, a British business data analysis company, for $10.25 billion.

Financial analysts noted that the consumer hardware business has become a commodity business, and that HP was just unable to compete:

“None of this should be surprising, in light of what’s happening to the consumer with respect to the amount and the type of PCs they’re buying and also the fact that even before Leo (Apotheker, the new CEO) took over, the company had been moving more into software and services, specifically targeted at businesses,” Kim Forrest, an analyst at the Fort Pitt Capital Group told Reuters. “You know that consumer PCs is the the thing that’s dragging the segment down. Because people aren’t willing to pay up. They want the sexy iPad. And they may need a cheap PC, but they’re not willing to pay up. All consumers seem to have eyes for is the iPad.”

Nevertheless, the big moves did surprise a lot of people in the world of technology — for a lot of different reasons. That’s because they reverse many of the company’s big bets over the past decade, and appear to be an admission of a series of failed business strategies.

The most obvious one is the bet that former HP CEO Carly Fiorina made in 2002 when she pushed through the controversial $25 billion merger with Compaq Computer. A lot of people opposed the move at the time.

As Duff McDonald of Fortune writes: “Most people — yours truly included — thought the deal was idiotic from the very day it was announced, evoking that old chestnut, “two drunks leaning on each other to stay upright.” But Carly Fiorina, then CEO of the storied technology company, rammed the deal down shareholders’ throats — shareholders that included a steaming mad Walter Hewlett, son of the company’s founder.”

Another bold move was the killing of the two-month-old TouchPad tablet business, which puts a big question mark over the future of HP’s mobile operating system called WebOS. HP had spent $1.2 billion in 2010 to acquire Palm, which created it.

Some tech observers note that the operating system might serve as an attractive alternative to Android’s for the mobile hardware makers HTC and Samsung in the wake of Google’s acquisition of Motorola.

Joshua Topolsky of the popular tech web site This Is My Next reported that an HP executive vowed in a Thursday staff meeting that HP would not be dropping support for WebOS.

“In short, it looks like HP is committed to finding a partner or partners to license webOS,” Topolsky writes.

The announcement also came as a surprise to some because as recently as this February, HP CEO Apotheker told the Wall Street Journal that its PC business gave the company “an immense competitive advantage.”

But he changed his tune Thursday, telling the Journal that “to be successful in the consumer device business we would have had to invest in a lot of capital and I believe we can invest it in better places.”

The Journal‘s Friday story reports that HP executives had hoped to hold onto its still-profitable PC business, but it became clear to them upon further analysis that they didn’t have the cash to buy their way into the more profitable software and consulting business.

Latest Idealab
Comments
Masthead Masthead
Founder & Editor-in-Chief:
Executive Editor:
Managing Editor:
Associate Editor:
Editor at Large:
General Counsel:
Publisher:
Head of Product:
Director of Technology:
Associate Publisher:
Front End Developer:
Senior Designer: