Last week was a big news week for technology. The “Googorola” story may be the start of a market shift in the cell phone industry. I believe that the HP story that broke after their earnings call is of far bigger impact to the entire PC environment.
From the start, HP was purely a service orientated business. Through a range of controversies and management changes they acquired Compaq. Then, took an enormous risk and dove into a “diversifying” market which initially was not their primary focus. Remember the big technology companies are public in terms of their financial status. They are governed by their shareholders and shareholders encourage risks if they see potential returns. Truth be told, I don’t believe the Compaq acquisition ever made the returns that the shareholders envisioned.
Fast forward a few years and another string of acquisitions are made by HP. They acquired a network company as networking is believed to be bursting at the seams. The 3Com acquisition might be a long term move, but ultimately, this will really help HP.
With all of the success that Apple is having with their tablets and cell phones, HP thought that buying Palm would protect them from being left behind. However, In a space of less than less than 18 months, HP decided to “retire” the Palm software and sell its PC division. This decision for me is one that highlights what happens when the hardware cannot handle the software designed for a particular device. Therefore, you’re left with sluggish performance, as was seen with the HP TouchPad… the biggest factor that lead to poor sales for the device.
What will HP do with Palm? Sell their patents that Palm has? Sell the company? I wish I knew.
It seems that HP will spinoff the PC division and either look for a buyer for the company or take the financial pain themselves. Lenovo has been mentioned as a potential owner for the PC division, but with their current financial situation, an acquisition as big as this is far from certain.
HP’s CEO Leo Apotheker comes from a software background (He was SAP’s CEO prior to joining HP), which to a degree might be the clue as to why HP is going to buy a software company to reinvigorate itself. It seems that HP wants to acquire the British analytics company Autonomy for $10 billion.
There are a lot of similarities between this story and the re-engineering that IBM did in the 80’s. The one big difference is that the PC market is much more competitive today. So Leo, what is the next move?