Fire Leo Apotheker right now. He clearly thinks of only in the short-term to appease Wall Street analysts. On August 18th, HP announced that they are looking into strategic alternatives for their industry leading PC unit. Huh? That is corporate speak for management either totally screwed up and needs to dump an asset OR that the management does not have a clue what it takes to run the business and would rather have the cash.
Why would you get out of an industry where you have a leading market share especially when the companies name is synonymous with PC’s? HP has over a 29% of the US PC market. I agree the overall PC market is shrinking as tablets eat into PC and laptop sales. But tablets are not serious business machines. Today they are mainly play things. I am sure they will improve with time but over the next couple of years they will only marginally impact the PC market. It will be years and many generations of technology before the tablet replaces the laptop. Years HP has to get tablets right.
HP clearly recognized the threat that tablets pose to the PC market. HP purchased Palm for $1.2B to get an edge on the mobile PC market in April 2010. They used the purchase of Palm to help create a new operating system (OS) for tablets called WebOS. In addition they hired some of Apple’s key employees hoping to jumpstart the new unit.
In July 2011 HP debuted its new tablet to try and capture some of the market from Apple and the Android market. Within a month, HP is now announcing that they are going to be getting out of the tablet market and started selling of the new tablets at fire sale prices. What could have possibly changed in one month? This is typical short-term thinking that is so prevalent in US businesses today. They spent literally billions of dollars to purchase Palm, design new OS and new tablets. They then spent millions on rolling out a new product and decided to pull out of the market within one month. This shows nothing but piss poor management. Management and the board had to sign off on their purchase of Palm. They also had to agree that HP should form a division to concentrate on tablet computers. And management had to know about the large ad campaign to roll out the product. If management was doing their job they should never spent the money on Palm, creating a tablet and software and then releasing it if they were going to kill it within a month. Somebody screwed up big time and should be fired. Start with Leo and then look at the chairman of the board. Both are clearly incompetent.
What to do to fix HP?
Fixing HP is relatively straight forward. HP obviously has too many managers that they have become a bureaucratic nightmare. HP is slow on releasing new ideas to the market. They are more concerned with the bottom line than their products. To see what I mean go to HP’s own website and read the customer reviews of their new printers.
I was looking to replace my existing HP wireless printer that was top of the line about 5 years ago. At the time the price was running about $500 for the model I own. The printer works fine but it does not work with my iPad because it is too old for HP to want to add it to their printer app. It also has a fax feeder issue that is slightly annoying but not so much as to force a change. I happened to see a new wireless HP printer at the local Staples that was marked down from $379 to $229. The new printer also had cheaper printer cartridges that supposedly printed more pages per refill than my current printer. Mathematically the new printer would save me approximately $180 per year on print cartridges which made the purchase of the printer a nobrainer. It would almost pay for itself within a year.
Before I purchased the printer I had enough sense to read some reviews on the model. I went to www.HP.com to read some reviews. On a scale from 1 to 5 (5 being the highest), it scored a 3.5 with a large amounts of people wanting to rate the printer lower than a 1 if the website let them. The amount of problems on the machine was almost comical.
- The machine would go into power save sleep mode and never revive without a complete shutdown
- The print cartridges would prematurely dry out forcing someone to buy more print cartridges instead of less
- The fax feeder would send clumps of paper through the feeder jamming the machine
- The machine would go into an endless reboot and shut down cycle
- See for yourself http://www.shopping.hp.com/product/printer/Officejet+Pro/1/storefronts/CM756A%2523B1H?tab=reviews&#defaultAnchor
The machine is being called “the worst printer ever” by multiple reviews on their own website! Apparently HP does not review their own website for a clue what is needed to be improved on.
How about spending some time and money fixing your products and reputation instead of short-term moves designed to prop up your lackluster stock? If HP concentrated on making tech products that worked with few issues they would be very successful. That is one of the main drivers of people willing to pay more for an Apple. They could charge higher prices because demand would be there. The only way HP has found to sell their cheaply made products is by lowering prices. With a bloated management structure you can only do that so long before you are bankrupt.
Stock Projection
I cannot make any projection about the stock because it took such a beating with the announcement of looking to get rid of the PC division and cancelling the tablet. I also expect current management to be fired within the next 6 months which will probably boost the share price. I would not own the stock at any price right now because the management has to be the worst there is in the technology base companies right now. Bad management tends to ruin things and I don’t expect anything different this time with HP. If you own it sell it and look at better run companies that have a clue what they are doing and where they want to be in the coming years. HP clearly has no clue.
Full disclosure
I have been an HP product fan for almost a decade. Almost all my PC’s and printers in my business and home are HP. It pains me to bad mouth them but they are steadily getting worse. The management is clearly just thinking about quarterly earnings and not about their products and reputation.
As of August 30th I do not own any positions to do with HP stock or bonds.
No comments:
Post a Comment