HP reaches for innovation roots
The US company that was started in a garage in 1938 and became the top computer producer in the world has gone through four chief executives in less than a decade. Its current leader says she wants to simplify the business and aim for a unified brand, Neil Parmar writes
To say that Hewlett-Packard has suffered from an identity crisis would be an understatement.
In less than one year, HP has unveiled a consumer tablet, then discontinued it just weeks after its debut; it has considered spinning off its personal computing business, then decided to keep it; and it has cut a reported 500 jobs in one struggling business division and is now consolidating two additional divisions.
Does that mean more layoffs are imminent?
"Everything is on the table," said Meg Whitman, the chief executive of HP, in Shanghai, where she launched 80 new technology products.
Ms Whitman, who took control of HP in September, is trying to clean up a mess left by predecessors. She is the latest to enter what seems to be a revolving door of chief executives, of which there have been four in less than a decade.
"There were a number of issues that compounded upon each other that made it a challenge for HP," says Bryan Ma, the associate vice president of client devices for IDC, a market research firm.
"It was an unfortunate series of incidents, whether at the management, product [or] organisational level," he adds.
Even with all the turmoil that HP has faced recently, the company still holds bragging rights as the top computer producer in the world.
At least for now, anyway.
During the fourth quarter last year, HP shipped more than 14.7 million PCs globally. That was down 16 per cent from the same point in 2010, according to market data from Gartner.
Meanwhile, Lenovo, the Chinese manufacturer that has eaten into HP's market share and moved into second place, increased its sales by 23 per cent in the same period, to nearly 13 million in last year's fourth quarter.
Yet things have hardly improved for HP this year.
First-quarter earnings at the American technology manufacturer fell nearly 44 per cent compared with the same time last year, while revenue dropped 7 per cent, to US$30 billion (Dh110.19bn).
"We're going to simplify our business," said Ms Whitman, the former chief executive of eBay. "Increasingly, you're going to see a unified brand, a unified design language that is going to make both our PC business and our printing business much stronger."
It wasn't always this way. Over the years, HP has struggled to keep its lead in the market, rather than blazing a path for peers to follow.
To begin with, HP became a digital darling of the technology industry because of its deep entrepreneurial roots and focus on advanced research and development through its various labs.
Its global headquarters for HP Labs is based in California, where it is "perched on a hillside just a few miles from the famous HP garage that is known as the birthplace of Silicon Valley", the company says.
That garage was the site where two tech-savvy buddies - Bill Hewlett and Dave Packard, who became close friends during a camping trip - created sound-testing equipment as HP's debut product back in 1938. Their first client happened to be none other than Walt Disney, who purchased what became known more simply as the HP Model 200A.
More research and production began, as HP rolled out frequency counters, oscilloscopes, computers, calculators, printers, laptops and personal digital assistants. The company also had its initial public offering, in 1957, then listed on the New York Stock Exchange four years later.
But in more recent years, competitors have started crowding into the computing market and introducing their own innovative and lower-cost products, especially in developing regions of the world.
"It is a challenge to grow fast in emerging geographies in the face of low incomes and local competitors," says Stephen Baker, the vice president of industry analysis at the NPD Group, a market research firm.
HP, in turn, has felt the pressure mounting, as observers say the company has missed the mark with new products among both business clients and individual consumers.
"HP hasn't come up with a product that would light a spark into business sectors," says Ammar Akhtar, the director of information technology at 1CallGroup Solutions in the UAE.
"Unfortunately, apart from notebooks [and] printers, there is nothing from HP that is out in the market that I would carry with me [the] whole day."
Retailers, too, have voiced concerns.
"The product lines in my view all fall within the 'me-too' category, with no real innovation or differentiation," says Omar Kassim, the founder of JadoPado.com, an online retailer in the Emirates that sells technology products. "It's a mass-market strategy, but not one that will help them to stand out and push towards well-above-average earnings," he adds.
At the same time, HP's leaders have struggled to stamp their mark on the tech giant.
In 2005, the chief executive at the time, Carly Fiorina, who oversaw the company's rocky merger with Compaq in 2002, was forced out by HP's board after failing to execute ambitious business plans.
Mark Hurd then stepped in for five years, during which he helped to expand the company and, in 2010, spent about $1.2bn for Palm, a maker of smartphones and personal digital assistants.
While his bold move was meant to give HP a stronger grip in the mobile-gadgets market, Mr Hurd soon found himself embroiled in what the press dubbed a "Silicon Valley soap opera". This involved a sexual-harassment investigation and accusations that he had falsified expense reports to cover up his personal indiscretions.
Mr Hurd resigned in 2010.
Last year, HP and its next chief executive, Leo Apotheker, took the unexpected step of killing a new consumer tablet that the company had created with Palm, just weeks after the product went on sale.
About 500 employees from Palm were laid off, according to news reports, and HP released a statement saying the company would consider spinning off or even selling its personal computing division, sending its shares on a volatile ride.
"Unfortunately, this left the entire consumer business hanging and resulted in Leo rightly having to go," says Mr Kassim. "It felt like they were losing a part of what makes HP HP - sort of like Heinz throwing out tomato ketchup."
Then, in September, Ms Whitman walked in to try her hand at being president and chief executive.
"When I came to HP it was no secret that I came in a troubled time for the company," says Ms Whitman.
"Multiple CEOs are hard on customers, they're hard on employees, hard on partners. So the first thing I tried to do was provide a source of stability, and the first decision I had to make was whether or not we were going to spin off our PC business."
She decided the business was worth holding on to, and HP will try to find other jobs within the company for the workers previously laid off from Palm.
Which brings HP's story to China, where the company has previously come under fire from customers after some of its laptops overheated.
"There were some issues about product quality a couple of years back, which is why, frankly, HP has been trying to get back on its feet in China," explains Mr Ma.
From HP's perspective, China is a crucial market for expansion, particularly because this year the country is expected to surpass the United States for the first time to become the biggest consumer of computers in the world.
"It is the year of the dragon," says Steve Hoffman, the vice president and chief of staff for printing and personal systems for HP. "The dragon is known for power, known for creativity, and the year of the dragon is often marked with change."
Other executives at the company say HP is on track to maintain its top position this year, with products that consumers will want to buy because they are based on extensive customer research. Yet they also acknowledge that their company needs to stay on its toes and keep reinventing the PC if it wants to stay ahead of the pack.
"If you don't have a killer product, you can't even play the game," says James Mouton, the senior vice president and general manager of HP's personal computer global business unit.
Ultimately, customers will decide whether HP delivers what it needs to remain number one. For now, some see positive signs emerging but warn that more time is needed to see how the company's strategy pans out.
And HP seems to agree.
"The challenges HP has seen over the last several years … have been well-documented," says Ms Whitman.
"We have a phrase at HP: 'We cannot change the past, but we can change the future'," she adds. "And we are focused on the future."
For a video about the turbulent times at HP, visit www.thenational.ae/business
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Updated: May 16, 2012 04:00 AM