Hewlett-Packard Changes Management But Not Strategy

Any CEO can change his management team. But, chess is not won by the use of new pieces. It is won by a  strategy of attack and defense.

Hewlett-Packard’s hapless new CEO, Leo Apotheker, decided to fire his chief administrative officer, Peter Bocian, and HP CIO, Randy Mott. Neither of those departures may mean much to HP’s future. The departure of Ann Livermore, who has run the firm’s enterprise division and many other operations over a period longer than two decades,  is a puzzler. Livermore must have done a fine job under former CEO Mark Hurd and the CEO before him–Carly Fiorina. Livermore worked under these two difficult chief executives during times of upheaval at the technology company. She would have been a convenient target because of the long legacy of her work.

What Apotheker seems to have is a new organization chart without a plan to use it. The CEO says he hopes to expand into Asia and India. He will be met by every other large tech company in the world there–each vying for market share. Apotheker  also says he will expand use of the HP WebOS . The firm got this software system as a part of its buyout of Palm. Palm’s product expansion was a complete failure. Now, Apotheker thinks he can use it to compete with Android, Apple (NASDAQ: AAPL), and Microsoft (NASDAQ: MSFT). HP would be very late to a market which is already dominated by powerful companies.

HP is an odd collection of divisions. The company’s revenue rose from $30.8 billion in the quarter that ended in April 30 last year to $31.6 billion this year. Net income only moved from $2.2 billion to $2.3 billion. There are probably not many cost cuts to make to improve that margin. Hurd bled the company of expenses, which was his trademark and something that he did very well.

HP competes with Dell (NASDAQ: DELL), Acer, Lenovo, and Apple in the PC business. The fierce battle for market share has brought down profits. HP has no tablet PC that has any chance to compete with Apple or Samsung. It will have to catch up in that business in which the two leaders are sprinting ahead. Revenue at HP’s personal systems group–its PC operations–dropped from $10 billion to $9.4 billion in the last reported quarter.

HP’s server, enterprise, and software operations compete with some of the largest and most successful tech companies in the world. These include IBM (NYSE: IBM), Oracle (NYSE: ORCL), and Microsoft (NASDAQ: MSFT). IBM is considered the leader in servers and IT consulting. Oracle has a huge advantage in data and storage systems. HP is boxed in and Apotheker has not given any reasons that his company should win battles against the entrenched competition.

Apotheker’s last possible expansion may be in the smartphone industry. He does own Palm, one of the original hand-held productivity devices. But, Palm could not fix Palm, and HP’s ownership does not mean that a larger steward can break the hold that Apple, RIMM, and Android-driven smartphone firms which include HTC,  have on Motorola and Samsung devices.

Apotheker would have been better off to detail his strategy and then change his management team to fit that strategy. Instead, he has tried to do it the other way around, if he has a grand plan at all.

Douglas A. McIntyre