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The weasels take over at HP
Aug. 18th, 2011 10:53 pmHP's decision to kill the WebOS smartphone and tablet business it bought with Palm and investigate selling off its personal systems group (PSG) betrays a blinkered and depressingly dated view of business.
Apparently, PSG offends the HP board and new CEO Leo Apotheker because while it represents nearly a third of HP's revenues, it has the lowest profit margin. Big surprise, eh? Everyone knows PCs are a low-margin business, but we don't see Michael Dell chucking in the towel.
Former salesman Apotheker is not just taking the short-term-profit-above-all-else approach, however – he is also trying to turn HP into a near-clone of his former employer SAP, with the purchase of analytics company Autonomy. He's a one-trick pony, going with the business he knows.
What he and the board are missing with their short-sighted approach – the weasel words "enhancing shareholder value" are there for everyone to see in HP's press release – is of course the invisible value in the personal systems business – the mindshare it wins and the way it opens the door for those high-margin services. This is what Dell understands – sell in the cheap PCs and servers, and then follow with some higher-margin storage, a bit of networking, some highly-profitable software and services, etc etc.
I guess that, like any other high-flying egoist and ex-salesman, Apotheker thinks that a business's divisions operate independently – that the software and services groups will trade just as successfully after the demise of the PC side.
And yes, perhaps they will – for as long as the current customer contracts run. But once they expire, if those customers must now buy their PCs from Dell or Lenovo, who will they first ask for additional services?
But apparently all the HP board thinks its shareholders care about is short-term profit, not long-term value. It's depressing, it really is.
Apparently, PSG offends the HP board and new CEO Leo Apotheker because while it represents nearly a third of HP's revenues, it has the lowest profit margin. Big surprise, eh? Everyone knows PCs are a low-margin business, but we don't see Michael Dell chucking in the towel.
Former salesman Apotheker is not just taking the short-term-profit-above-all-else approach, however – he is also trying to turn HP into a near-clone of his former employer SAP, with the purchase of analytics company Autonomy. He's a one-trick pony, going with the business he knows.
What he and the board are missing with their short-sighted approach – the weasel words "enhancing shareholder value" are there for everyone to see in HP's press release – is of course the invisible value in the personal systems business – the mindshare it wins and the way it opens the door for those high-margin services. This is what Dell understands – sell in the cheap PCs and servers, and then follow with some higher-margin storage, a bit of networking, some highly-profitable software and services, etc etc.
I guess that, like any other high-flying egoist and ex-salesman, Apotheker thinks that a business's divisions operate independently – that the software and services groups will trade just as successfully after the demise of the PC side.
And yes, perhaps they will – for as long as the current customer contracts run. But once they expire, if those customers must now buy their PCs from Dell or Lenovo, who will they first ask for additional services?
But apparently all the HP board thinks its shareholders care about is short-term profit, not long-term value. It's depressing, it really is.
