Today's news that Hewlett-Packard may sack its relatively new CEO points to an ongoing identity crisis at the big PC maker.
The fact that the world's No.1 supplier of PCs has been trying to disown that very business and everything that goes with it--like its TouchPad tablet--then simultaneously holding out the possibility that it won't spin off PCs points to some very serious identity problems. CEO Leo Apotheker's potential ouster is the latest symptom, according to analysts.
First, a quick look at recent events that preceded today's news. When HP announced earnings back in August, Apotheker stated that he had "outlined a strategy for HP, built on cloud, solutions and software to address the changing requirements of our customers." That same day HP announced its plan to acquire software company Autonomy for about $10 billion. And HP then proceeded to shutter its WebOS device business, including its TouchPad tablet.
In other words, Apotheker--with the board's blessing--has been trying to make HP into a software company. But analysts don't think that's necessarily the best strategy for a company that has hardware so deeply embedded in its DNA.
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"You can't ignore legacy. [That's] what your value is," said Bob O'Donnell, an analyst at IDC. "They have a huge amount of value in the PC space. There's no way around it, it's just a huge, huge business."
Ashok Kumar, an analyst at Rodman & Renshaw, has harsher words. "It's like a clown without a circus. The way they're managing this whole thing is a tragicomedy. Here's a storied Silicon Valley institution being reduced to a laughingstock."
"The board made the decision to hire Leo [Apotheker] despite all of the baggage he brought with him. And when he made these announcements about restructuring [in August] he had the blessing of the board."
Kumar continued. "But if you go back and look at past public statements, they have said in no uncertain terms that the PC business is intertwined with their overall strategy. Then for [HP] to do an about-face on this makes you wonder what's going on," he said.
And what about HP's vision of buying its way into the software business? "Their strategy of being in this high-margin software services is all well and good but the reality is that you have a company that's grossly under-invested in their enterprise division during [former CEO] Mark Hurd's tenure. And then they try to catch up by constantly, constantly overpaying for assets," he said, citing the acquisitions of Autonomy and 3Par.
"You just can't cherry-pick a sector that you want to be in and expect explosive growth. The genesis of the company was PCs and instrumentation. They don't have to be IBM [which sold off its PC business in 2005]. They can be different and still be very profitable."