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HP Analysis: Carly Fiorina Facing "A Skeptical Business Press"

The Challenge: How Does a Company Succeed in Enterprise IT, Personal Computing, Peripherals, and New Technologies Simultaneously

SYS-CON Media West Coast Bureau Chief Roger Strukhoff writes: If you want a friend in Washington, get a dog," the saying goes. The same holds true for most anyone in a public light, including CEOs of very large computer companies. The latest CEO being dogged by criticism is Carly Fiorina of HP, who is facing "a skeptical business press" and "concerns over (the company's) ability to compete in the PC market," according to a report by Benjamin Pimentel in the San Francisco Chronicle (www.sfchronicle.com).

The recent HP management re-org prompted the latest concerns over Fiorina and her performance, particularly in that this re-org slammed the company's underperforming PC business into its perenially successful printer division, a move that could, as the thinking goes, drag down the entire combined division.

No Market Synergy

A quick comparison of marketshare numbers from 2000 vs. 2004 reveals some unfavorable information from HP's perspective. Third-quarter figures from IDC in the year 2000 (the last decent year for the entire IT business) showed Compaq leading the parade with a 13.1 percent market share, followed by Dell at 11.5 percent, HP at 7.8 percent, IBM at 7.4 percent, and Fujistu Siemens with 5 percent. HP was the hot company back then, growing 46.8 percent from year to year. Thus, HP and Compaq owned a combined 20.9 percent of the world market.

Run the tape forward to 2004 (and please run it quickly so no one has to see 2001-2003 all over again), and you'll find Dell with worldwide leadership with 17.9% of the market. HP is in second place with 15.8%, according to IDC. This in a growing market that expanded by almost 15% in 2004. (Research from Gartner for 2004 showed a similar pattern with Dell in first at 16.4 percent and HP second at 14.6 percent.)

Thus, in the four-year period Dell moved from 11.5 to 17.9 percent of the world market, while HP and Compaq combined dropped from 20.9 to 15.8 percent. With each tenth of a percent worth several tens of millions of dollars in revenues, this change is dramatic and stark. HP and Compaq had collectively almost doubled Dell in 2000, yet now sits firmly in second place as a combined entity.

IDC's 2004 figures also show IBM in third at 5.9%, and Fujitsu Siemens and Acer rounding out the top five vendors.

Beneath the Numbers

The ongoing concern about HP, of course, centers around the question of whether its controversial merger with Compaq was a good idea. The merger was a fundamental test of wills between Fiorina's vision of a new HP and an old guard epitomized by dissident shareholder and founding family member Walter Hewlett. Given Fiorina's penchant for sweeping, less-than-technical pronouncements and cultivation of a showbiz-type image for herself and her new company, the merger controversy devolved into some nasty personal attacks from all parties involved.

Lost in this process was whether or not the merger truly did make business sense. Could two goliaths, separate by 2,000 miles between respective headquarters and a similar gulf in corporate culture, combine to be the most powerful player in all of IT? Compaq had already found little success in a mega-merger of its own, having put DEC out of its misery in the late 90s as a way to move further up the IT food chain in the enterprise computing market. Its takeover by HP represented a second step upwards and eliminated it as a competitor to HP's personal computing business.

Analyzing HP is a complex task, and indeed, one facet of today's Chronicle report covered the question of whether HP was trying to do too much, was spread too thin. How does a company succeed in enterprise IT, personal computing, peripherals, and new technologies simultaneously? Is it possible to do so? Would it be a good thing for HP to do so?

When one thinks of the resentment against IBM in the 60s, which led to a protracted federal lawsuit, and against Microsoft in the 80s and 90s, which led to a less protracted lawsuit, how is it logical to hammer HP for not being dominant in everything it does? Why should the CEO of a company whose profit rose 38 percent to $3.5 billion in its most recent fiscal year be characterized as "under fire" or "in trouble?"

Marketing Moving Forward

One concern expressed by many analysts, including this observer, during the HP/Compaq merger was how Fiorina et al planned to combine and differentiate its product lines, particularly in the PC space. Compaq had wanted to be a big enterprise IT player for many years, since its original Tower systems in the 90s. It then acquired Tandem and DEC in short order, striving to respond to opportunities it saw with major business clients.

Compaq built its reputation on being a sort of gold-standard in the personal computing business, from its original "portable" and desktop computers (which had a hotter chip and cooler looks than the IBM PC), through its entire product line as the personal computer market grew. It surely hoped to maintain that standard throughout the enterprise.

HP meanwhile, built a reputation over the decades for top-notch, if not inexpensive, instruments and computing systems. The merger of the two companies thus brought together two of the most highly regarded product lines in the industry. How was HP going to differentiate them? Would the Compaq brand simply disappear? Would a "Ford/Mercury," "Toyota/Lexus," or GM-style differentiation occur?

Here are key marketing sell points from HP's Web site:

  • About HP desktop systems: "Versatile technology you need to communicate, create and enjoy more"
  • About Compaq desktop systems: "Smart, powerful computers delivering the most for your money. Aggressive designs and an attitude to match."
  • For portable systems, the site states that HP "notebooks help you discover, create and enjoy multimedia experiences at work and play." Compaq notebooks, on the other hand, have "advanced technology and great value to enhance your productivity."

Is There a Problem Here, Officer?

OK, the HP systems are skewed more toward multimedia. And the site shows that the Compaq systems are very slightly more inexpensive. But what is the big difference between HP and Compaq systems? How does one develop fierce brand loyalty (the kind nurtured by the hard-edge Dell marketing machine) with this sort of weak differentiation and weaker marketing copy?

So herein may lie the problem. Today's HP/Compaq line is too similar and marketed nebulously. So constrained, can it ever regain the market leadership it collectively had before the merger? Does it matter if it ever does? Was Carly Fiorina's big adventure in acquiring Compaq a mistake, and more important, was the HP board's big adventure in hiring Fiorina a mistake? Does she take an inordinate amount of grief because she's a woman? Or is it flawed vision on her part that is solely responsible for criticism directed at her? Should she get a dog if she doesn't already have one?

More Stories By Roger Strukhoff

Roger Strukhoff (@IoT2040) is Executive Director of the Tau Institute for Global ICT Research, with offices in Illinois and Manila. He is Conference Chair of @CloudExpo & @ThingsExpo, and Editor of SYS-CON Media's CloudComputing BigData & IoT Journals. He holds a BA from Knox College & conducted MBA studies at CSU-East Bay.

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