Can Hewlett-Packard bounce back? Third quarter results are in and they don’t look good. Total revenue is down 5% year over year, and profits tanked on a $9.2 billion noncash write-down on the 2008 EDS acquisition.
What’s HP’s strategy? Meg Whitman has now been CEO of the struggling giant for a year. She compares HP’s turnaround to that of Starbucks, saying “Usually these kinds of turnarounds take anywhere between four or five years… There’s nothing fancy about these turnarounds. This is not advanced business, this is 101.”
I question if refocusing on core competencies is enough. Maybe HP needs to get into the smartphone and tablet markets. Maybe it needs to expand its services business. Think I’m wrong? Then bet your money on HP stock and get rich. HPQ trades at its lowest point in a decade and sells for an rock bottom forward P/E of 4.2.
HP… and many others will need to find new markets or do new things.
1. The actual equipment makers are releasing products themselves. Apple releases its own products. Microsoft is venturing in that realm too. What is left of simply reselling is a very low-margin business.
2. Services is very tricky. Again, the actual product companies are increasingly accessible on their own. Microsoft/Apple… are hosting their own services. As are a myriad of other companies. So there is less room for HP to simply go to customer sites and install such services. I don’t want to overemphasize this point. But it is a dangerous trend for companies like HP.
I don’t know what HP is going to do. IBM made a good transition to services. It’s possible I guess…
But it’s going to be a major uphill battle.
…and retreating from PCs and consumer devices. Didn’t they announce they were getting out of the PC market a while back? What happened to that? Maybe it wouldn’t be such a bad idea after all. They seem to have a bad reputation of overheating laptops. The Z1 AIO workstation looks cool but is out of my price range and a lot more expensive than an equivalent PC + monitor of the same specs. And it looks like Intel’s Thin Mini-ITX platform will soon take over that space.
The BeOS CURSE?