The three headwinds facing HP
Business Management

The three headwinds facing HP

For any admirer of the American business phenomenon that is Silicon Valley, the news that Hewlett-Packard is to lay off up to 9,000 staff is a sad reflection of that pioneering company's recent struggles. Ever since 1938 when Bill Hewlett and Dave Packard began building audio oscillators for Walt Disney in a Palo Alto garage, HP has been synonymous with the generous, innovative, questing spirit of engineering and creativity in California. This is more than a company: it has been the embodiment of dreamers who want to make the world a better place one transistor, byte and bit at time. The fabled HP Way was a treatise in favour of mutual respect, trust and integrity: characteristics all too rare in this blighted age.

Sadly, the layoffs, which will account for 16 per cent of current headcount, are not some isolated incident. At least twice in the past 12 years, the company has attempted to rein in spending through vast downsizing exercises. Smarter people than I might have answers for the current malaise, but a start might lie in examining some of the headwinds that have seen the company struggle.

Management. The CEO remains the heartbeat of the business and HP has had plenty of them over the past 20 years but few that can point to unbridled success in their tenures. The rein of Carly Fiorina, later a political figure, was stormy and featured boardroom clashes and a controversial decision to buy Compaq. Mark Hurd, a brilliant operator at NCR and Teradata, appeared to be righting the ship before being forced to resign over a disagreement with the board. (Oracle then CEO Larry Ellison immediately hired Hurd and accused HP's board of making the "the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago".) Ex-SAP executive Leo Apotheker had a brief, tumultuous stay, including the acquisition of Autonomy that remains the subject of a legal battle. Former eBay CEO and another sometime politician Meg Whitman oversaw the splitting of HP into two companies: HP Inc. with PCs and printers and HP Enterprise for business technology, servers and services.

PCs. When HP CEO, Apotheker publicly questioned whether HP should be in the PC business. It eventually decided to stay in the sector but, although it remains one of the great PC brands, vying with Lenovo for market leadership and selling tens of millions of units a year, the market is low margin (under six per cent in HP's case) and looks to be at risk of a long-term decline.

Printers. The DeskJet and LaserJet lines (and particularly the ink cartridge and other supplies that feed them) have for decades been bastions for HP but analyst Toni Sacconaghi of Sanford C. Bernstein recently called its printer unit a "melting ice cube" in the heat of people printing less and cloned and remanufactured supplies.

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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