HP: Is it spreading itself too thin in the IT wars?

Hewlett-Packard's acquisition of Palm is more than a move into the smartphone market. The purchase is yet another front in a tech war that's alienating current partners and spreading HP too thin.

Hewlett-Packard's acquisition of Palm is more than a move into the smartphone market. The purchase is yet another front in a tech war that's alienating current partners and spreading HP too thin. Can HP manage battles in almost every corner of the technology industry?

Add it up and HP owns a piece of every part of the information technology stack now. That approach may be swell for cross selling, but focus is a potential problem.

Let's go through the lay of the land:

  • HP competes with IBM and Accenture in services;
  • Cisco and Juniper in networking via the 3Com purchase;
  • Oracle, Cisco and others in the data center and IBM and Dell on servers;
  • Apple, Acer, Dell, Lenovo and others on PCs;
  • Lexmark in printers, clearly HP's most dominant market;
  • EMC and NetApp on storage;
  • And now Apple, Google, Microsoft, Nokia, Research in Motion, HTC, Motorola and others via the Palm acquisition.

At the Gartner conference last year, HP CEO Mark Hurd chided IBM for getting out of the PC business. He said you need to be credible in all parts of the enterprise IT stack. Hurd wasn't kidding. He now has the everything from the data center to the roughly 3-inch screen in your hand.

Is that really true though? After all, IBM is doing just fine being a software and services company. IBM bet big on software---Cognos, Rational Software and others--- and Big Blue has reinvented itself by ditching low-margin businesses.

On IBM's latest conference call, IBM CFO Mark Loughridge said:

If you look at the ongoing strategy we have, we want to move into intellectual property-based businesses that are highly scalable and related to the -- driving these Solutions offerings that we have. Solutions offerings like business analytics, as an example. What we're doing on the flip side, on the divestment side, is moving out of businesses that have lower growth prospects and lower margin prospects.

Indeed, most of HP's competitors maintain a similar focus. Sure, Oracle is in the hardware business now via the acquisition of Sun, but the Larry Ellison express is driven by databases and applications. Cisco has also spread out, but the company is all about the network whether it runs through the data center, enterprise infrastructure, set-top box or your living room.  EMC and NetApp have played Switzerland nicely in the data center architecture scrum and Apple and RIM are clearly focused primarily on smartphones and mobile devices.

And then there's HP and a bevy of question marks. The company has renamed its EDS unit in a move that arguably negates a strong brand. 3Com is now HP Networking. HP wants to be known as more than a PC and printer company, but it will face challenges. Only delivering strong results across its units---especially the new ones---will change the perception of HP over time.

Can HP deliver? Financially, there's no indication that HP is about to slip. However, you have to wonder how these moving parts will gel into one cohesive culture.

The other big issue for HP will be the shifting of long-time alliances. As Mary Jo Foley noted you have to wonder how the Palm acquisition went over at Microsoft headquarters.

The HP-Cisco relationship has already gone belly up. Cisco's move into the data center changed all of that last year. HP retaliated by acquiring 3Com and breaking out the Converged Infrastructure architecture. Heather Clancy says that aside from both HP and Cisco seeing the network as the center of the data center the two parties don't agree on much. Clancy writes:

HP would love nothing short of complete data center domination: An all-HP-hardware, all-the-time data center approach, where it controls servers, storage and the network. Yes, folks, one throat to choke. The question is, do you really want it?

Cisco's approach has been to form alliances with the likes of VMware and EMC and give you a preconfigured data center that would look like one-throat to choke when you make a support call. This battle will play out through the channel and system integrators.

These intense battles are playing out in every category for HP. It's a daunting and potentially very tiring war. HP is fighting trim now, but this war is going to be a protracted one. In February, Hurd laid out the strategy:

I believe HP has the best and the broadest portfolio in the industry. We are number one or number two in virtually every category where we compete. We will continue to invest heavily to ensure that we maintain our technology advantage and align our portfolio to lead the evolution in the marketplace.

The next-generation data center will be delivered by the Company that can best leverage scale, industry standard hardware that is differentiated into so

ftware, and financed and delivered via global services. Printer pages will be awarded to the company that can deliver the best quality, usability, speed and affordability. The PC business will be won by the company with scale, innovation, brand and global reach. As I consider the market trends and survey the competitive marketplace, I like HP's chances to win.

Palm doesn't necessarily fit that equation. HP isn't anywhere the No. 1 or No. 2 in the smartphone market. Maybe that changes, but for now you wonder if there's an HP version of Yahoo's peanut butter manifesto a few years from now.

Related: How HP thinks about R&D: It's about new products not spending