HP loses driver, still lacks direction

HP may have freed itself of Carly Fiorina but the company's problems go deeper than issues of leadership, claim analysts

Now HP has decided to part ways with chief executive Carly Fiorina what does the future hold for a company that has been struggling to find itself ever since its acquisition of Compaq in 2002? Although the merged company has managed to cut costs by combining operations, it has lost market share in certain areas.

Some industry experts have criticised HP for being too large and unwieldy and have argued that the company's future success depends on splitting its constituent business units or at least cleaving the company into two halves; one to serve business customers and another focused on consumers.

"The question is whether HP needs new direction, or just a new driver. We think it needs a new direction. Our view is that HP has a broad portfolio whose separate parts don't work well enough together. Fixing that will require changes to strategy, not just execution," says Douglas Hayward, senior analyst for industry researcher Ovum.

Hayward adds that many HP divisions are not as profitable as more focused best-of-breed companies. "While HP undoubtedly has good products and services, Fiorina failed to combine the hardware, software and services businesses so that they performed better than if they were spun off. That's ironic for a CEO who arrived from Lucent, itself a spin-off," he says.

If HP does opt to lighten its load, the consensus amongst experts is that the PC division is the stand-out candidate for being first to go. Speaking in London on Tuesday morning at the Regent Conference for senior IT professionals, Mike Norris, chief executive of UK reseller Computacenter said that HP should follow IBM's lead and sell its PC business as soon as possible.

"IBM selling PC was an inspired move. I wouldn't like to predict that HP are going to do the same but it wouldn't surprise me," he said.

Norris argued that the ability to make money from PC assembly has gone and HP should follow IBM into concentrating on supplying chips and other commodity items.

"I have asked HP 'What is the value you add to an Intel processor and an MS operating system?' they rack their brains and say nothing," he said

Ovum's Hayward claims the crux of the problem is that HP has failed when it comes to cross-selling between its services and product lines.

"HP must either create these virtuous connections, or get rid of the bits that don't help to drive revenue and profit growth. We suggest it starts right now with the PC business," he says.

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