Perspective: How Hewlett-Packard can be saved

To Mark Hurd, CEO, Hewlett-Packard:

Congratulations. You have taken on one of the most prestigious and difficult jobs in the computing industry, and for a reasonable $20 million a year for the first year--or $54,790 a day, including weekends.

No doubt you're contemplating retaining consulting firms to advise you. Instead, I offer my advice for free. You'll save $700,000 on consulting fees (that's about eight entry-level employees--plus insurance--you won't have to fire), and you can print as many copies as you want.

In a nutshell, you need to:

1. Embrace Canada as a model
Canada. As a nation, it will never stride the world like a colossus, rearranging political borders or altering fundamental economic relationships. Then again, you'll never see European intellectuals pooh-poohing the cultural imperialism of "Hockey Night in Canada" or other shows from the Canadian Broadcasting Corporation.

In the computing world, HP is Canada. It will never be as big as IBM, nor will it be accused of not being innovative--a label often attached to Dell. You're the friendly alternative. Avis Rent A Car made a fortune off this approach.

2. Make money on hardware
For years, Dell has typically been the fastest-growing and most profitable PC company. If computers were commodities, it would stand to reason that Dell's products would cost less than HP's. Actually, the average price of a Dell model is usually higher than that of an HP.

Similarly, Acer has roared back to life in the past year, pitching fancy notebooks to Europeans and Asians.

By contrast, HP is all over the map. Last year, it offered free DVD-burners on consumer desktops--a high-end feature in low-end PCs. Was the company trying to woo bargain buyers or alienate high-end ones? The same issues crop up in its server business.

Charles Smulders of Gartner Dataquest is right: HP will have to exit some geographic territories and markets to concentrate on others.

It could take on a weakened Gateway in the bargain basement, expand efforts in India and China, go upscale in established markets with designer PCs, or a careful combination of all these. In any case, money could be made. It's just a matter of careful planning.

3. Go direct...sort of
HP should sell all business hardware directly but pitch consumer machines through retail. The channel partners, who make most of their profits on service, will understand. Besides, the alternative for the channel will be Lenovo Group, an untested quantity.

4. Become an IP outfit
HP has always had great scientists. It's the marketing that has been clunky and, unfortunately, all the backslapping road warriors who came in with the Compaq Computer deal got fired. Hence, try to license more technology to those who can sell it better. The crossbar latch could pay big in semiconductors.

5. Woo doctors, soldiers and security guards
Three markets are currently thriving: health care, defense and homeland security. Combine their needs with the stuff you have in your labs. At the University of Manchester, researchers are looking at ways to employ inkjet nozzles for spraying human cells. Your guys

Biography
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas. He has worked as an attorney, travel writer and sidewalk hawker for a time share resort, among other occupations.

More Perspectives

HP - Loose Change for Diet Sprite

Great Article.
I love the local interest bit about "Loose Change for Diet Sprite".

As a business consultant to technology CEOs, I could never fathom Carly's having been hired - then I was aghast at her groos blunder in buying Compaq; a slow giant buying a faltering has-been.

On the fun side, I think many of us (at least those of us in the Backwoods/Northwoods) would like to read more about the HP rank and file's reaction / response to Carly's demise and exit.

Was there dancing the the HP aisles?
Are the Agilent folks talking about returning to the fold?
Were there free drinks at the local watering holes?
A raft of new bumper stickers like: The B.... is gone - as opposed to: "Ditch the B....?

As for Lenovo buying IBM' PC biz, that is perhaps also a real blunder - a PLC with too much hard cash burning a hole in its polyester pocket - and too little understanding of the PC market and IBM's failure - buying a failing entity, all to the good of Dell and HP.

John Schuler
Portland, Oregon
email: [e-mail]
www.johncschuler.com

[culture_of_one]

Free advice...

Don't quit your day job, Mike.

[alx359]

The real problem: clear identity

The big problem I see with HP is a deep identity inconsistency in their middle/long-term strategy. They try to imitate Dell and IBM at the same time, falling-short doing both.

- Dell is the king of business process optimization. Their main goal is not invent anything but take clearly bolding trends and outsource mass-production as cheap as possible. But as any optimization has a limit they need to diversify (now printers, next TV's, etc.).

- IBM at the other hand, is gradually leaving any hardware-related business (e.g. Hitachi, Lenovo) and reshaping itself as a real global IT consultant pioneer. Mainstream technology is becoming a too slim-margin commodity, but using it right is not. So they're really approaching a new evolution step of a media-agnostic knowledge-oriented corporation.

HP tries doing both at the same time. They try playing Dell's game w/o a company structure and culture that is hyper-optimized for doing this as Dell is. On the the other hand, to reach IBM, they got involved in the risky business of consolidation of 2 huge and disparate corporate cultures (HP/Compaq) that got not enough time and a clear vision to reshape itself under Fiorina's leadership.

Traditionally, HP has a strong R&D unit as its main asset, but if playing Dell's game, such unit is mostly redundant. IBM is becoming purely services, but with a R&D oriented not to build cool stuff but to find solutions to a wide range of business problems is in-sync with their whole strategy and pays-off in the middle/long term.

My opinion is HP really needs to split in 2 companies to survive. Their corporate culture needs to get 2 strong and distinctive shapes. Dell and IBM strategies differ so deeply that they are simply financially incompatible to be kept under the same roof as HP tried to achieve until know.

[culture_of_one]

Word on the street...

is that HP's customer service also sucks. Identity is only one part of becoming a "great" company.