When Technology Kills Technology


(B) The day that she started her new job, Meg Whitman was interviewed on CNBC by David Faber, and to the question why did she accept the position of CEO at Hewlett Packard she responded: “Because HP matters to the technology industry, to Silicon Valley, and to the US”. Yes, most of us who started in the early stage of the computing industry would not want to see HP disappearing from the industry.

But what can you do when over half of your revenues are in declining markets? Very little – so the challenges for Ms. Whitman are daunting, to say the least.

We do not print anymore – we only scan documents from time to time, and that need is likely to disappear in the future as well. We are using less and fewer PCs (and Mac) and more and more for basic computing (Web surfing and e-mail) our smartphones and tablets. While most of HP’s declining revenues are from PCs and printers (PC and printers were $15.5 B while the company total revenues were $30.6 B for its FY Q2 2012 quarter), revenues from servers, software, and services, assuming that HP can grow them, are not compensating yet for the decline.

While HP bought Compaq under the leadership of Carla Fiorina, and HP streamlined its operations under the leadership of Marc Hurd, IBM was growing its service business, buying small software companies, and expanding its line of data center servers. HP failed to leverage its acquisition of Palm and its Web OS to pursue the smartphone and tablet markets.

So what are the strategic options for HP to reinvent itself? There are not so many. HP is facing a strong leader Lenovo, in China and in emerging markets, that are the last market segments where PC sales are growing. And, HP has such a broad product portfolio that it cannot focus as IBM does and has mastered to do so on services and software.

The story of HP reminds me of the one of Netscape (although the end of Netscape was due to its competition not because of the introduction of new technologies). When Bill Gates decided to give away for free Internet Explorer, he put Netscape out of business. Overnight Netscape had half of its revenues disappeared. Netscape tried to grow its Web server product lines to compensate for the lack of browser sales but failed in doing so and was acquired by AOL. Sad story for a company who marketed one of the first browsers, and invented two key Web technologies: JavaScript and SSL. Ironically, Mr. Marc Andreessen is on the board of HP today.

Yes, we agree with Ms. Whitman, HP matters to Silicon Valley and to anyone in the technology industry. But never forget that the best companies that brought incredible technologies to the marketplace such as HP are also vulnerable to the introduction of new technologies.

Note: the picture above is the garage where HP was started by Bill Hewlett and David Packard.

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