February 9, 2005 9:21 AM PST

Does HP need a new course?

Hewlett-Packard says it needs a new captain, not a new course, but outsiders say the company needs to change its tack.

Despite ousting their CEO, Carly Fiorina, HP board members and executives on Wednesday said they are largely happy with the company's direction and see the company's problems as related to how the company executes its business strategy.

However, many analysts say HP remains in a bind, as it struggles to simultaneously compete against Dell's efficiency and IBM's breadth.

"The question is whether HP needs new direction or just a new driver," Ovum senior analyst Douglas Hayward said in a note Wednesday. "We think it needs a new direction. Our view is that HP has a broad portfolio whose separate parts don't work well enough together."

In a conference call with reporters, interim CEO Bob Wayman and newly installed chairman Patricia Dunn maintained that HP's breadth is its strength.

The company credited Fiorina with good execution of the Compaq merger but pointed out shortfalls such as last year's well-publicized problems in the server and storage unit that led to the firing of three top executives.

"We need to make sure we have a management team and a set of processes that don't allow that to happen again," Wayman said.

But many say HP's problems run deeper, and they urge the company to look to broader changes in its business.

Meta Group analyst Nick Gall said HP needs to either find more synergy in its businesses or consider splitting up the company. Gall likened the situation to the one IBM Chairman Lou Gerstner faced when he took the helm at IBM.

"They need to do something very creative, very innovative."
--Nick Gall
Analyst, Meta Group

"His strategic insight was to find what was synergistic about keeping IBM together," Gall said. "He found it in the services play."

Gall said it is not clear where HP might find its solution.

"They are stuck between a rock and a hard place, no question, which means they need to do something very creative, very innovative." Gall said. "So far, they have not done that."

On the business side, in particular, analysts criticized HP's current "Adaptive Enterprise"

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A Tale Of Two Hewlett Packard's
Fiorina steps down at HP

A Tale Of Two Hewlett Packard's

Tale 1
Eight years ago a I bought an HP Omnibook 800 laptop. It was a marvel of engineering -- small, lightweight, fast, great looking, and RELIABLE. I still use it today as an adjunct computer, even though it is slow by today's standards. Made in the USA.

Also eight years ago, as an IT Manager, I inherited several HP servers. Our company was built on these servers, using them to deliver tech services to customers. Made in the USA.

Ten years ago I bought an HP 10B business calculator. It has a perfect form factor, and the batteries last for years. Made in the USA.

Tale 2
A year ago I bought an HP Pavilion 4600 laptop computer. Since purchase, it has been in the repair shop twice already. The Cardbus slot was faulty, requiring the motherboard to be replaced. The built-in mouse pad key got mushy, requiring replacement. The tab key stuck, I fixed that myself. The DVD/CD drive cannot read RW format (design flaw). The modem frequently drops a connection for no apparent reason. The AC adapter is plain bizzare. It sparks when I plug it in, and emits a HUGE amount of RF (how it passed FCC muster I'll never know). Recently, the hard drive began making "thumping" and loud scratching sounds when the bottom gets warm, it sounds like it is going to fail. The HP tech support people in India only seem to know what they are doing about half the time. The laptop is made in China.

Those HP servers I used to run the infrastructure for the service business? They became expensive to buy and expensive to repair. A four-day service repair fiasco was the coup de gras. I replaced all the servers with Dell (a fairly new server player at the time)and never looked back. I subsequently bought several hundred thousand dollars worth of Dell servers, and later expanded that to Dell deskstops and laptops. When one of the Dell servers had a problem, the Dell tech was onsite in 4 hours -- on a Sunday morning. The server was expertly repaired and back online in 30 minutes.

HP Today
So this is HP today. Products that are unreliable . Shortcuts leading to substandard quality. Manufacturing and support moved to 3rd World countries. Massive layoffs and purges to rid the company of the old HP Way employees. Wow, great progress!

What does HP need to do to fix itself? To start with, hire a CEO that has an engineering background -- someone over 40 who knows what good engineering and quality mean. Unfortunatley Bill Gates, Michael Dell, and Steve jobs are not looking for work.

Today, would I buy products from HP or recommend them to my clients as a consultant? Other than HP printers, NO. Tomorrow? That all depends on HP. Maybe the place to start is to hire back some of those old crew cut, white shirt, tie clip, slide rule, HP Way engineers. Start making and supporting products back here in the USA like Dell is doing. Land and salaries are cheap in rural America, and unemployment is high. The Carly Way - hacking away at staffing, outsourcing too much, excessive focus on cost cutting, buying companies, cheapening the product, surely didn't work.

Posted by Stating (869 comments )
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good ridence to the offshoring queen
Its a great day for everyone since she is gone maybe HP realized that she was bad for business. Lets outsource the CEO
Posted by cpudrewfl (56 comments )
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