Why HP's latest move was more ballsy than moronic

Why HP's latest move was more ballsy than moronic

Summary: Wow. This one's gonna be taught as a B-school case for decades to come.


Wow. This one's gonna be taught as a B-school case for decades to come. The question is whether it's going to be taught as a cautionary tale for future CEOs or as a role model of what to do once the s*it hits the fan.

Let's separate out the four parts of the story. First, there's the story of Palm and webOS. Then there's the story of the orphaned users of TouchPads and those silly phones. Then there's the whole earnings bit. And, finally, there's the buy (for a whopping 10x valuation) of some random enterprise software company.

My history with Palm goes way back. I was PalmPower's editor-in-chief back in the 1990s and worked closely with them until, well, they started to stray from sanity.

But I'm not here to talk about Palm today. I'm here to talk about HP's breathtaking moves -- and try to decide if they were moronic or ballsy.

I've thought about this all night. I've thought about the announcement that the number one PC vendor is dumping its PC business. I've thought about how people who shelled out more than $500 on TouchPads are basically being screwed.

I've thought about what you do when faced with a big-ass failure and you still have a company to run.

HP could have stuck with the TouchPad and refined it, like Microsoft often does with their products. Microsoft is famous for first releases sucking, but by the third or fourth release, the product is unstoppable. HP could have done that.

But HP is competing with Apple in this space and -- face it -- HP is not going to win. Apple has a lock on the hearts and minds of consumers and while HP might generate some price/performance respect, it'll never generate the level of infatuated love that Apple does. In a consumer market, lust not only sells, it wins.

So, what do you do? What. Do. You. Do?

I've often talked of the business necessity of ruthless prioritization. That leaders need to put the ship first, meaning that the enterprise as a whole must remain standing for any division, operation, product, or employee to be relevant.

Apotheker, standing on the bridge of the U.S.S. Hewlett-Packard, saw an iceberg ahead. The PC market is transforming at an epic rate, to one that's less PC and more, well, Apple. HP's tablet and phone offerings were essentially imploding under his feet.

On the other hand, the good ship HP is a strong vessel. It's got an amazing array of enterprise and data center offerings that are best-of-breed. It's got an enormous services business, and many of the world's most important enterprises run on top of HP gear.

So, he had a choice. Keep the ship pointed at that consumer iceberg or veer (heh!) suddenly away. He had the choice of shaking up his passengers something awful for a few seconds, or possibly killing them all by crashing into the 'berg.

He chose to turn that ship away from the iceberg. He shook up the passengers, broke some of the precious china as it fell off the shelves, and probably scared the bejesus out of his stockholders.

It was a smart move. It was, sadly enough, the obvious and only move.

It was a ballsy move.

See also:

Topics: Mobility, Hewlett-Packard, Mobile OS, Operating Systems


David Gewirtz, Distinguished Lecturer at CBS Interactive, is an author, U.S. policy advisor, and computer scientist. He is featured in the History Channel special The President's Book of Secrets and is a member of the National Press Club.

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  • Your analysis would make sense if Apotheker

    were a newly-named CEO, but he isn't. He's been there for a year. He's the one that made the initial WebOS purchase, and signed off on the TouchPad in the first place. In other words, he's the one who put the good ship HP on direct course for the iceberg.
    • Can't argue that.

      @baggins_z - Either way, what was done is done. I'm agnostic on his conclusion as I'm still in a bit of shock.
      • Ditto

        Absolutely stunned. I was hoping that WebOS would prove to be a viable competitor to iOS and Android in the tablet and phone markets. This would have helped to keep all of them (relatively) honest and competitive, in stark contrast to the desktop PC OS space.

        Still far to early to tell if the moves are "ballsy" or not - but it is unbelievably moronic to launch a product and then kill it less than three months later; far better to have seen the light a little earlier and killed it off [i]prior[/i] to launch, surely?

        This smacks of a panic decision made with very little forethought or planning.
    • Apotheker did not buy Palm

      Mark Hurd did that.
      John L. Ries
      • RE: Why HP's latest move was more ballsy than moronic

        @John L. Ries THANK YOU! I'm shocked to see so many let that error pass.

        Apotheker is a SAP guy, and IMO a hasty choice when the HURD guy had to be released suddenly.
    • RE: Why HP's latest move was more ballsy than moronic

      @baggins_z if Apotheker wasn't brought on to transform HP into an enterprise software company then I don't know why he was. Killing off consumer lines only makes sense. The PC is dead anyway. Too bad Hurd didn't cut that off a few years ago. Probably contributory to his moving on...
      • The PC is not dead....but....

        The PC business is going to be highly transformed from what it is now. Less anchors on the desk, more mobility in consumers hands.
        linux for me
      • RE: Why HP's latest move was more ballsy than moronic

        @hawks5999 <br>The PC business is dead as it is *now*.<br><br>One way forward may be something along the lines of Motorola's Atrix (Android) smartphone; with a dock it can turn into a netbook, again, running Android.<br><br><br>You'll essentially have your home PC, wherever you go, in your pocket.<br><br>If that kind of thing proliferates, products similar to that are an existential threat to Windows' market, though I have a feeling Microsoft is positioning Windows 8 for similar functionality.
  • I've been IBM'ed

    The only thing that sucks more than what happened here is Dell, or rather the though of considering Dell for our desktops and portables.

    I need to know more about this PC "Spin-off", ASAP.
    • RE: Why HP's latest move was more ballsy than moronic

      I really wouldn't be surprised to see Dell moving out of consumer PCs either. That part of their financials the other day was the worst performing business segment, and their guidance on it was *more* negative moving forward.

      It was inevitable, but the commodity PC (desktop/low end laptop) business is shrinking in profitability. There's probably only room for at most 3 or 4 OEMs now, probably Sony, Samsung, Toshiba and Asus.
      • RE: Why HP's latest move was more ballsy than moronic

        @Theseus Dell has got be loving the news. HP imploding its PC business means more people buy Dell. Period.
  • RE: Why HP's latest move was more ballsy than moronic

    Maybe I'm one of the nearsighted fools sitting on a deckchair, but I think that most companies would be jealous of having the position of largest pc company in the world, regardless of the profit margin. The pc market remains profitable for HP, and forms such an important part of HP's soul and identity. The Windows platform is not in danger of extinction anytime soon, and SOMEBODY is going to make and ship the personal computers that run it. HP's position as the largest pc OEM ensured that they were one of the few companies that could reliably profit from it.
    On a personal note, I feel an emotional loss because of this move. My father worked at HP for 40 years, and from the 1970s through 2000 would bring home the latest pcs and other gadgets. I grew up with the development of the pc, and for me that meant HP. Sad.
    nearly nil
    • Yeah, you are.

      @nearly nil The phrase [i]"regardless of the profit margin"[/i] kind of gives it away. I feel for you on the loss of the "HP Way." Bill & Dave must be rolling over in their graves.

      In defense of Leo, though. He may be ahead of the curve here. If Steve Jobs is right and we're in a post PC world, getting out of PCs now, where you're shopping a business that's still profitable is better than waiting and trying to unload a dog at a discount. The guy who sold his buggy-whip business in 1890 was [b]way smarter[/b] and richer than the guy who sold it in 1908.
      • You are Correct, But.......

        @matthew_maurice Yes, your example of the Buggy Whip Company is correct but I'll bet that seller lined up the buyer before announcing the sale. By the time the HP PC line is sold it will be a shadow of its former self. Who or what company is going to buy carloads of HP products without knowing whether it is to be sold to someone who will support it or shuttered completely? And since it was profitable and may have absorbed more overhead proportionally than other units, it may be that HP's profit will sink disproportionately to the loss in revenues.
    • HP has become a very sad parody of its former self

      @nearly nil
      Your father was lucky to get out in 2000 before the rot set in (with Carly) and the HP way went out the window along with principles, decent products, and employee pride.

      Actually, HP was a mere bit player in the PC field, despite the brilliant engineering and the many innovations (touchscreens, 3.5 in floppies, the Integral etc), until the late 90s when they finally moved into retail channels.
  • RE: Why HP's latest move was more ballsy than moronic

    I agree. IBM dumped their PC business. There are no margins unless you get into specialized kit.<br><br>The WebOS venture was stupid to begin with. They ticked off the Linux community and took on the mess that Palm made.<br><br>This was a good move for HP. Sell off the parts to DELL or ACER or ASUS.
  • Damage to image may be worse.

    As a user of HP products that have been part of the buy, market, dump routine a couple of times I now would be hard pressed to invest in an HP product outside of printers. Investing hundreds of thousands of dollars in technology just to have HP dump the technology without any qualm about the user having to go reinvest in some other HP technology or invest in another companies technology that have a track record of holding the course, I am going to opt for someone else rather than hope that HP won't dump another line. While it is true that this can happen with any company, HP is proving to be the leader in having no regard for their customers.
    • RE: hope that HP won't dump


      Got a memo signed off by my CIO and CFO:

      <i>"Do not buy any more HP PCs</i> Long term support is uncertain. We can not afford to be <u>orphaned</u>."
      • RE: Why HP's latest move was more ballsy than moronic

        My ONLY remaining HP product is a multifunction printer (MF5770). It's a true performer as have all the previous HP offerings - but - now I don't think I would spend a penny on an HP product, service, support etc.....

        Sad - Ain't it?
  • Premature

    Come back next year and we might know by then whether or not Mr. Apotheker made the right decision. I'm satisfied that it was a rational decision, though unfortunate.
    John L. Ries