by Rob Enderle

HP Impresses With Successes and Plans for a Turnaround

Oct 05, 20126 mins
Computers and PeripheralsInnovationIT Leadership

Hewlett-Packard is one year into a turnaround, led by CEO Meg Whitman, which could last for several more. This week she and other HP executives told financial analysts that the company knows what needs to be fixed and do, in fact, plan on fixing them. Such candid talk is refreshing these days, columnist Rob Enderle says.

Hewlett-Packard held its financial analyst meeting this week in San Francisco, opening with the two most important folks in any large-scale corporate turnaround: the CEO and the CFO. Meg Whitman and Cathie Lesjak, respectively, were followed by the heads of the major HP divisions, including enterprise services, printing and personal systems, software, security and the converged cloud.

Whitman, In an Election-Season Rarity, Tells It Like It Is

The event was the first true showcase of whether Whitman can live up to her promise of turning HP around. Given that this is an election year, and given Whitman’s foray into politics in California’s 2010 gubernatorial race, I’m particularly fascinated by differences between presidential rhetoric and Whitman’s presentation of the problems and solutions at HP.

Politics generally forces politicians into long speeches with little content. This year’s election rhetoric comes down to a repeated drone of the problems being someone else’s fault and, thanks to a divided Congress, impossible to correct. This extreme lowering of expectations showcases an ability to pass blame but doesn’t lead to a real path to fixing anything.

While Whitman did point to a procession of rapidly changing CEOs as a cause of HP’s problems, she spent more time articulating the problems and her progress in correcting them. In effect, she is taking ownership and overcoming obstacles, not blaming others for problems and then avoiding them. Politicians tend to run from metrics and milestones because they don’t want to be blamed if the numbers aren’t met. Instead, Whitman identified the lack of metrics as a core part of her problem—and one that was well along the way to being fixed.

Finally, government is often defined by antiquated systems and manual practices. Most technology companies are run the same way; like the cobblers’ children, they get outdated, obsolete technology. For HP, that means its CRM, SFA and HR technology was unforgivably out of date. However, Whitman has implemented a best-of-breed program, using HP’s partners, to assure that HP is as well-managed as it advises its customers to be.

It was hard to watch this and not wish the U.S. government has as strong a grasp of its problems and was as far along in fixing them. Whitman and Lesjak did their company proud.

HP Hardware: Design Breaks From the Norm

I spend much of my time looking at personal technology and lamenting the lack of consistent design focus these days, even in Apple products. I love well-designed products and think most people who buy personal products share this love.

This week HP, in Apple-like fashion, showcased its Envy and Envy Spectre laptops and the ElitePad 900 Windows 8 business tablet. In essence, the company has introduced consistent design language, down to diamond-cut edges and distinct form factors.

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News: No HP Smartphone Next Year, Whitman Says

HP broke from the norm with the all-in-one Spectre One, complete with a 23.6-inch, 1080p multi-touch display, and the ElitePad, which is a throwback to unique HP technology. The ElitePad uses sleeves known as Smart Jackets to transition between focused functions. This concept originated with the iPaq, a PDA that came to HP in the Compaq acquisition and that could morph into unique tools depending on the sleeve you used. This was the first large-scale implementation of the modular computer idea that originated in IBM but was successfully showcased by HP. The Smart Jackets make the ElitePad the most innovative tablet to come on the market.

HP Software: Having Suffered, Now Poised for Growth

Software is a $4 billion business for HP. This makes it the sixth-largest software company in the world, with 94 customers in the Fortune 100 and 50,000 customers overall. HP consistently leads the automated software quality, distributed systems management, archiving and enterprise search and discovery markets, and it isn’t far behind in security and vulnerability management.

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HP’s acquisition of Autonomy was broadly panned because of its cost, but this week HP showcased the power of this tool to instantly analyze big data and make well-informed decisions. Using social medial as the example, users can quickly segment and group trending discussions and study them to better understand what’s driving them. This kind of research would otherwise take hours and be susceptible to bias.

The software unit was the part of the company that Carly Fiorina strengthened, Mark Hurd all but killed and, now, Whitman is recreating. This business unit arguably suffered the most from the CEO changes. Given the massive margins that software can generate, it’s good to see HP software back on track after so many painful changes. I expect much of HP’s future growth to come from this business unit—which will be critical in HP’s ongoing war with Oracle.

HP in Good Shape, Considering Turnaround Will Take Years

If you look at the mess Meg Whitman started with, this is actually an impressive amount of progress in so short a period of time. I’d like to see more movement with acquisitions, though; Lesjak indicated that HP won’t pursue any acquisitions for a while—and hopefully HP will address them before they happen.

Marketing and execution messages were also missing from HP’s meetings, but this is likely because executives wanted to focus more on a state-of-the-nation discussion about the strategic long-term performance of the company and less on last three months of 2012. I expect a marketing focus in future events.

HP did address whether it would buy back stock. Such a short-term move increases a company’s perceived shareholder value but can dramatically reduce the resources needed to execute a turnaround. Lesjak said HP won’t do this. Each business unit then presented its unique advantages and ability to address challenges such as Oracle’s unfortunate attack on its large-scale systems, which HP says it is starting to mitigate.

Overall, this is a very good effort for the first year of what will likely be at least a four-year turnaround. Granted, much of the execution, including layoffs at HP, will take place year, but company executives showcased a good knowledge of the problems they face, believable solutions to correct them and metrics to assure their progress.

Going by the numbers, HP over the last decade has shifted from what was mostly a printing company to one that’s far more diversified and balanced. Such a shift, combined with this week’s honest presentation of the business and solid plan to grow and improve it, speaks well to HP’s long-term survival.

Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.

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