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Fiorina Says HP May Get Out Of The PC Business
Mikelgan writes: "Interex (the global HP user's group) is reporting that HP CEO Carly Fiorina told USA Today that HP may get out of the PC business altogether if the merger with Compaq fails. Here's the story."
I thought the general consensus is that if the merger fails that she will booted out.
While Compaq is trying to improve itself for the merger, it seems that HP's only game plan is the merger. Now that's some real corporate foresight!
Bah... I want Carly Fiona to experience some pain for what she did to the HP calc division.
HP getting out of the business leaves very few PC makers left in the retail market. You'll be left with Compaq, Gateway (at their stores), Apple (in both Retail and their own stores), and Sony (in 'select' stores).
Dell is still all mail order and with IBM and Toshiba beginning to transition what's left of their PC lineups over to web based orders as well, customers will walk into CompUSA, Sears, or Circuit City and will face themselves with two choices: Compaq or Apple?
I think this is a good decision by HP. They make a killing off of printers and cartridges, as well as scanners and other peripherals. With margins in the PC market severely low (unless you're Apple), this could be a good move for them.
Would you, or anyone else, know how HP's PC division is doing financially?
HP used to be a company that made good test equipment, sold it at the highest prices, and supported it very well (also at the highest price). Now that's been spun off to the bizarrely named Agilent, leaving HP with the low-margin PC's and printers. The trouble with making PC's is that the market is very price competitive -- you've got to cut prices to just above cost to sell anything. Maybe you can make it up in volume. Or maybe you let your expenses get a teeny bit too high, and you're losing money every time you make a sale.
Just wondering how HP weathered that change, from a "don't just do things right, do them better at any cost" culture to low-margin commodity manufacturing?
Did anyone else see the Red Herring 'Open Letter' (not yet online, got the dead tree yesterday), saying "Quit Carly Quit" in no uncertain terms?
HP. HP had a powerful business. 'Scopes, testing equipment, laser printers, calculators. People paid for that brand name. Like IBM, no one ever got fired for buying a LaserJet.
Guess what, those days are *GONE* and gone for good. I blame Fiorina, and a lot of other folks do to.
The merger is her 'child' she will not let anything happen to it. She would go under with its failure anyway. So I think that these comments are made deliberately so it will seem as 'lesser evil' to do the merger and silence some opposing voices.
If programs would be read like poetry, most programmers would be Vogons.
PCs are simply too easy to build. Anyone can do it. The real issue becomes PRICE, and the big companies are caught between having the power to leverage incredible prices out of vendors, and being to big to move the product out the door before the price loses its luster.
It is a matter of time before there are no pre-built PCs at the mid-level on up- that they are all built-to-order and sold at the price of the components at that exact moment. I'm not going to make any quotes, but there is (obviously) an incredible level of depreciation per week for a PC sitting on a store shelf. Is anyone making money these days selling pre-built PCs? I know HP also sells built-to-order boxes...but who would pay their relatively high price?
As a bit of an aside: and this says as much about Sam's Club (I hate that store, they could do Springer auditions there... but I had to go there for work purchases occasionally) but I'd see these HPs that were at least a year old on the shelves... with their year old price tag (still at a premium). What an undignified way to sell PCs!
Both companies seem to have made serious blunders at its lower level consumer lines that would certainly make me think twice about their server/networking products.
Imagine a world with nothing but white box builders.... OK, that will never happen.... imagine a world where everyone just builds their own PC.... no, that will never happen either- not that it couldn't.
Those that suggest you "dance like no one is watching" really want to see you make a complete fool of yourself.
If Hewlett Packard were to pull out of the PC (note, big if) it would be the end of some of the best desktop and server products in the industry.
From their consumer, soho, business and workstation PCs (such as the Brio, Vectra and Kayak ranges) all the way up to their server offerings, HP have consistently produced top-notch products.
Well designed, reliable machines with excellent utilities (is there a management suite out there that's better than TopTools?) backed up by a professional and knowledgeable support structure have made HP PCs a dream to work with - as both a end user and a system administrator.
Sure, the printing business may be the company's major cash cow but it's its systems that really impress me.
I've been fortunate to have reviewed PCs from dozens of manufacturers, and I can honestly say that if I bought a PC (I tend to build my own) there would only be two companies I'd buy from. HP is one of them.
But let's be realistic here. HP has a massive installed user base, including many blue chip corporates. It's not going to abandon making PCs and those customers (many of whom will have support contracts that guarantee the availability of their preferred desktop and servers for years to come) any more than it's going to abandon its print business.
From the sounds of it, this is classic boardroom spin ("if X doesn't happen then we'll be forced to do Y") aimed squarely at getting Fiorina the votes she desperately needs to push through the HP/Compaq merger on which she seems to have mortgaged her career.
Quite frankly, if this comment was a serious statement of HP's intent then it would have been made to a more respected media outlet, such as the Wall Street Journal or a Ziff Davis title, or via a major press conference, rather than the less-than-heavyweight USA Today.
"Accept that some days you are the pigeon, and some days you are the statue." - David Brent, Wernham Hogg
The problem with the PC business is that nobody makes any real money from PC's except for Intel and Microsoft. It's a perfect picture of the problem with commodity vs. non-commodity equipment. People consider PC's to be commodity hardware, but that's not the case. A PC is built mostly with commodity hardware -- everything except the CPU and the operating system. Uncoincidentally, the makers of those two components are the only ones able to set their price points high enough to make any real money. (One has some decent competition, and therefore can't set their prices too high... the other has a monopoly and can set their prices outrageously high.)
This is why the fall of the MS monopoly is inevitable. Once the market realizes that the OS can be commoditized as well, Microsoft will be lucky to keep any of the low end at all. Why sell a $500 computer containing a $100 operating system, when you can sell a $400 computer with a free one?
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Will that help Apple or will that help Compaq? The only reason that I know of that people walk into those Gateway Country stores is on word of mouth on "Get a gateway, not a Comcrap" or whatever. But word of mouth isn't as powerful as seeing JUST Compaqs when you are looking at all the PC's in a line. Apple at least is putting their stores in shopping malls and making themselves more visible, but Compaq will be showing the nice low sticker price.
However, will Compaq put up the price when it knows they have less to compete with? Will they have an advantage where people might have been choosing HP simply because it matches the name on their printer? With PC margins and a merger in the works, that might happen.
Again however, don't leave Apple out. I once had a compaq, now I homebuild. I like Windows 2000, very capable OS. XP is not, and thats what everything is now shipping with. For something thats supposed to be intuitive, its surprising not. Linux is not at the home desktop level yet (don't flame me). Apple however, has gone leaps and bounds over where they were five years ago. Their new OS looks very slick and they have an eye on design as well as functionality. As long as they don't screw up in the coming years, look for them to increase market share.
To be honest, I'm sure this isn't going to be the spark that makes either company a huge success. They'll both probably see a small marginal increase in sales and there will just be one less store bought computer to complain about.
- gtaluvit (prnc. GOT-tuh-LUV-it)
I've been thinking of putting this in a letter to Carly for some time now. Of course, more people will read it here (a few) than if I send it to her (zero), so here goes:
Ms. Fiorina,
As a Silicon Valley native, I have been very concerned with what has happened to a local institution under your control. Over the past few years, we have seen Hewlett-Packard shrivel from a industry giant in several sectors to a PC and server vendor that is struggling to be considered tier-one.
As such, I offer the following advice:
1. Give calculators to Agilent.
You and Mr. Morris made a lot of enemies by announcing the dissolution of ACO. However, handing the reins to Agilent seems like a simple solution. It seems that the vast majority of HP calculator customers are likely to be Agilent customers anyway. Even though you and Mr. Morris have destroyed ACO, HP calculators have survived gaps in R&D efforts before. Perhaps Mr. Barnholt's team will be able to rehire some of the talent in Australia, and failing that I'm sure that he can recruit some excellent embedded system developers, both from inside and outside of HP and Agilent.
2. Give the Hewlett-Packard name to Agilent.
I'm sure that Mr. Barnholt would be delighted to bring the prestige of the Hewlett-Packard name back to the Test and Measurement business. Furthermore, this move would neatly solve many of your current problems. The copies of The HP Way sent to you by your employees and observers must surely be piling up by now, getting rid of the HP name will likely get the Hewlett and Packard heirs off your back, since their forefathers' legacy would be Mr. Barnholt's to protect.
These two moves would leave you free to pursue your aspirations to build a printer and server powerhouse, and might even keep you in the PC business, despite your recent comments.
You would, however, need a name for this new company. Might I suggest Compaq?
You have violated Robot's Rules of Order and will be asked to leave the future immediately.
Speaking for myself only...
Who cares about HP's PC business? What Carly & Co. should be shot for is letting the crown jewels go to hell in a handbasket. I'm talking about the PRINTER business.
HP printers used to have the reputation of being built like tanks, and quite rightly (I personally saw a LJII that fell off a 4 foot table in the Northridge quake. After it was picked up and the toner reseated, it worked just fine.).
Nowadays, they're cheap flimsy plastic crap.
Fascism starts when the efficiency of the government becomes more important than the rights of the people.
PC makers don't get it... there is simply no way to differentiate yourself in this market or under Intel or MS's umbrella...
Sure there is; look at Sony. They came relatively late to the PC game and have done very well. While they have a well deserved rep for proprietary hardware problems, the flip side of this is giving consumers what they want and leveraging their strengths.
In some ways you could compare them to Apple. Firewire, strong video integration for users, high (relative to a beige box) design sense. Re: music, they have taken a different road by tying some of their desktop PC's to MiniDisc, a format you may not see much in the US, but which dominates in Japan, and is I believe more prevalent in Europe.
They're also one of the few manufacturers to try to run with Crusoe; not exactly under Intel's umbrella. As far as M$, well Linux and *BSD are very nice, but not really ready for the homebody users that are Sony's bread and butter. I run Suse on my Vaio notebook and am very happy with it.
There is no way to differentiate a commodity except price, so take your products out of the pure commodity category, and people will buy.
Sig?
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