HP head favors 2016 candidate ‘with experience in politics’ over Fiorina.
Seventy-seven years after Stanford University graduates Bill Hewlett and Dave Packard began tinkering in a garage, the company that became the foundation for Silicon Valley is breaking up.When Meg Whitman, Hewlett-Packard’s chief executive, was preparing to cleave her company in two, she feared reliving a shoe disaster from early in her career.
On the day Hewlett-Packard split into two companies, the tech giant’s chief executive, Meg Whitman, said she backed “someone who had some experience in politics” for president rather than Carly Fiorina, a former HP CEO whose campaign for the White House is based on her business experience. On Sunday the computer colossus is being divided into HP Enterprise, focusing on software and business services, and HP Inc, which will keep the personal computer and printer operations. Whitman was an executive in charge of the Keds brand at Stride Rite a few decades ago as the company was making a transition to a new “high-tech” warehouse. Fiorina, the first woman to run a Fortune 50 company and the only woman in the Republican field, was at HP from 1999 to 2005, when she left with a $21m payout. Once one of Silicon Valley’s most respected companies, HP officially split itself in two on Sunday, betting that the smaller parts will be nimbler and more able to reverse four years of declining sales.
The aim is to develop a sharper focus both for the enterprise unit and the PC-printer division that made it a household name but has become fiercely competitive and less lucrative in recent years. It remains to be seen whether the breakup will revitalise a company that has been in a defensive, restructuring mode for several years as it lost ground to rivals like Chinese PC maker Lenovo, and as tech sector leadership was taken over by mobile-focused Apple and Google. Whitman worried so much about a similar hiccup that during planning meetings for the HP breakup, “Can we ship Keds?” became a sort of shorthand for worrying about bungling. HP has long had a special place in the hearts and minds of Silicon Valley but today the company is often seen as a dinosaur overtaken by younger, more dynamic start-ups.
But there are dramatic twists in HP’s story, including scandals, a revolving door for CEOs and one of the most ill-fated mergers in tech history, that make HP more than a victim of changing times. The market value of HP today is roughly $US50 billion ($A70.67bn) — less than half of its annual revenues — compared with nearly $US300bn for Facebook, $US500bn for Alphabet and almost $US700bn for Apple. The other, Hewlett Packard Enterprise, or HPE, will sell the computer servers, data storage, networking, software and consulting services that run a modern company. In a conversation with significance for a Republican party torn asunder by “outsider” candidates, Whitman was asked by CNN’s Poppy Harlow why she was not backing Fiorina and instead endorsed New Jersey governor Chris Christie.
The Compaq acquisition: Much has been said about HP’s 2001 buyout of its larger PC rival, and the story is back in the news thanks to then-CEO Carly Fiorina’s U.S. presidential campaign. Dell’s direct sales model was about to turn the industry on its head, and tablets and smartphones would deal a blow from which PCs have never recovered. The breakup into two separate companies “will unlock value for shareholders, as it allows each separate company to better focus on their core markets”, said Deutsche Bank analyst Sherri Scribner in a research note. “Compaq was a portfolio of a lot of underperforming companies. On Sunday, she admitted in an interview on ABC that her statement in the third debate that “92% of the jobs lost during [President] Barack Obama’s first term belonged to women” was wrong. It was pointed out after the debate, which took place in Colorado on Wednesday night, that 2012 Republican nominee Mitt Romney had made the claim, and had been proved wrong at the time.
More recently, Burris said the company “has been showing signs of life on the execution front” but “it has to dramatically accelerate its execution and get the job done.” The question is whether Wall Street believes the two companies will benefit from the separation. “Anytime you make a change, you make a claim,” said Toni Sacconaghi, an analyst with Sanford C Bernstein. “They say, ‘We’re on the front edge, everyone will have to catch up to us.’ But both new companies aren’t that wildly different.
Whitman said, in the interview to be broadcast later in the day: “I think it’s very difficult for your first role in politics to be president of the United States. “And so I think having experience in either the Senate or as the governor of a state … is really important. In 2006, HP admitted it had hired private investigators who spied on its own board members to figure out who was leaking company information to journalists.
HP, the less technically ambitious of the two new companies, will largely occupy the building that used to house HP’s famed research and development division. The offices of William Hewlett and David Packard, kept intact after they left more than 20 years ago, are being sealed off with a separate entrance so that employees of both companies can come by for visits. The EDS purchase: Buying a big IT services company in 2008 looked like a smart way for HP to diversify into more profitable areas, but HP “never unlocked the value from the deal they were looking for,” says IDC analyst Crawford Del Prete.
Since October 6, 2014, the day Whitman announced the split, a 500-person team inside HP has done more than 300,000 tests of its systems to see if they work right, built 75,000 new ways to interface with its computers and cloned 2,800 applications to use in one company or another. What’s undeniable is that his relationship with R-rated movie actress Jodie Fisher cost him his job and kicked off a disastrous string of events for HP.
Del Prete doesn’t see it that way: Hurd slashed expenses, was adored by Wall Street, and probably would have reinvested some of those savings in the long term, he says. And IBM has reported declining revenue for 14 consecutive quarters. “We have to recognise how much technology has changed and change with that,” Whitman said.
HP shelled out $11.1 billion for the U.K. software maker and took a write-down of $8.8 billion the following year, effectively admitting that it had drastically overpaid. HP claims it was hoodwinked by Autonomy’s management, and lawsuits are ongoing, but there’s evidence that HP rushed the deal without knowing what it was getting into. It wasn’t a terrible idea — IBM did the same and hasn’t looked back — but dithering about it in public for many months caused uncertainty that hurt HP’s business and helped its rivals.Apotheker also killed off HP’s webOS smartphones and tablets, which HP gained when it bought Palm for $1 billion a year earlier. It said a few weeks ago it will shut down its Helion cloud services in January, and focus instead on “hybrid” infrastructure and partnering with other cloud providers.
And the core infrastructure business of Hewlett-Packard Enterprise has “never been executing better,” according to IDC’s Del Prete, who pointed to its 3Par storage gear and industry-standard servers. What matters, he says, is whether Hewlett-Packard Enterprise can make the right acquisitions and partnerships over the next 24 months to bring back some growth.