Posts Tagged ‘hewlett packard’

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The PC is dying or so say some. Its haters might start singing “Ding dong the witch is dead.” Is that why the record is doing so well in the charts at the moment, do you think?

Those who see Microsoft as the embodiment of evil empires, might be smiling. Yesterday saw data from IDC indicating that PC sales fell 14 per cent in Q4 last year, which was the biggest fall ever recorded. Data from Gartner was almost as bad.

On that news, shares in Microsoft fell 4.4 per cent yesterday. HP did even worse, however, with shares down 6.5 per cent. Dell lost 1.2 per cent and Intel 2 per cent.

Despite that, the Dow and S&P 500 closed at a new all-time high. Apologies for cracking a joke from the 1980s, but as chips inside PCs suffered, chips inside burgers did well.

Burger King saw its share price rise 4 per cent, as investors – rather rudely – celebrated news that CEO Bernardo Hees is stepping down.

Shares in Apple fell 0.3 per cent, although frankly it is hard to understand why its shares should fall at all; after all, the IDC data also showed that tablet sales are soaring.

In the UK the FTSE closed at 6416, up on the day before but just shy of 100 points less than the year high set in early March.

In Japan, investors continue to celebrate Abenomics – and all the bullishness and dovishness from the country’s central bank – with the Nikkei 250 closing at a new high for this decade, and at 13549, 30 per cent up so far this year.

©2013 Investment and Business News.

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HP has lashed out. When it paid $11billion for a UK software company that produced a search engine that no one really seemed to understand, some said they didn’t understand what HP was up to.

Back then the PC company was under the leadership of Leo Apotheker. A former boss at SAP, Mr Apotheker was a software man. His big idea for HP was to move it into software. Hence the purchase of British software company Autonomy.

If you want to know what Autonomy does, the best description may be search engine with knobs on. Is its product any good? Well HP thought so, so it must have been.

Except that a few months later Autonomy, under the HP banner, looked like a pale shadow of what it once was, and the company’s management team, including founder Mike Lynch, had been given their marching orders

Then HP decided it didn’t want to be in software; it was a PC company. Err no it wasn’t a PC company, it was a printer company. Err no it wanted to be a tablet company. Err no it was a consultancy like IBM. Errrr.

So Leo went, and in came Meg Whitman, who shined a light of certainty on the company. Now HP is absolutely certain it doesn’t know what it is.

But one thing it does seem to be certain about is that buying Autonomy was a mistake. Now it is alleging that the British company cooked the books, put certain costs down as marketing costs when they were unit costs, and booked sales to distributers as sales to end users. Mike Lynch denies it of course. He may be right, or HP may be right.

But what is for sure is that HP panicked, and still seems to be panicking.

Okay it still sells a lot of PCs, but its margin on each sale is tiny – around $22, according to IDC. Contrast that with the profits enjoyed by Apple, which is making money out of the fact that its brand name justifies a premium. Compare that with the profits enjoyed by Google, which rakes in the dollars from adverting when Androids are sold. Or contrast it with Amazon, which counts the dollars as it sells books and other goods from its stores on the back of the Amazon Fire.

The truth is that the PC market may not be dead like a dodo, but it is like the Siberian tiger – on the endangered list.

Chastened IBM saw the signs and got out, became a consultancy, and now Big Blue is back, and for a while this year enjoyed a higher market cap than Microsoft.

But for PC companies like HP and Dell, change is required but what change?

This is classic innovators’ dilemma, or what Clayton M Christensen called the “technology mudslide hypothesis.” In his model, established companies in a position of market dominance reinforce their position of strength through their specialisation, but when a new so-called disruptive technology emerges, they miss it. They get relegated to backwaters or go out of business.

Christensen himself took the disc drive industry as an example, and looked at every major change – for example from 14 inch disk drives used for mainframes to 8 inch disks for mini computers, 5.25 inches with the emergence of PCs and then 3.5 inch disks as laptops were developed. He showed that with the emergence of a new disc drive standard, there was a change in market leadership; previously dominant players started doing dodo impersonations.

What is especially interesting about the Christensen study is that the companies themselves were often aware of the danger, researched the new burgeoning technology, but their existing client base showed no interest, and urged them to stick to what they already knew.

Kodak fell victim to innovators’ dilemma. It even flirted with new technology before the rest of the field; it was, after all, a pioneer in digital photography. It still failed to change, however.

HP saw the changes coming too, which is why it bought PALM.  It didn’t know what do next, however, and actually cancelled its PALM based products about the same time as the Autonomy purchase.

Err, that was not a good move. Still, when all else fails, it can always blame the accountants.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here