Will Carly Fiorina's resignation from Hewlett-Packard spur manufacturers and other business customers to move to rival IT vendors? Maybe, according to some analysts and users. Much will depend on how HP adheres to the competitive strategy already carved out by Fiorina, as well as how long it takes to name a new CEO.
"HP is at a crossroads right now with its enterprise customers. Things really could go either way," said Bob Parker, vice president of IDC's recently formed Manufacturing Insights analyst arm, in an interview with eWEEK.com.
Among CIOs and buyers in the manufacturing space, Hewlett-Packard Co. is up against competition from IBM Corp., Microsoft Corp., SAP AG and Oracle Corp., according to the analyst. Parker has coined the acronym "SHOMI" (SAP, HP, Oracle, Microsoft, IBM) to refer to this set of frequently contending vendors.
HP has built its business around hardware products and "low-level services," both of which are becoming quickly commoditized.
HP had been expanding its portfolio of software under Fiorina's tenure, as well as "high-level services that are very good," according to Parker. But he also pointed out that HP's middleware is still quite scanty in comparison to SAP's ERP product, for instance.
If HP fails to push forward with an increasingly soup-to-nuts approach, the vendor could become "marginalized" versus its rivals, Parker said. On the other hand, HP might then come to be viewed by some customers as "less biased" than IBM, for example, opening up new opportunities for HP in the role of "trusted advisor."
Observers also note a number of competitive strengths for HP, even during these difficult times. One of these is HP's credit rating, which can become a key factor when a vendor is vying with competitors for the same customer, according to Nick P. Nilaro, C.F.A. (Certified Financial Advisor), a senior director at Fitch Ratings in New York City.
Fitch expects Fiorina's resignation to carry no immediate credit rating implications for HP. But this outlook could become less positive if the CEO position stays vacant for too long, or if HP experiences "inconsistent operating and financial performance" during the CEO search period, he told eWEEK.com.
Supply chain execution is another of HP's advantages, according to some. In another eWEEK.com interview, Dr. John Halamka, CIO of Harvard Medical School, said he's been relatively happy with HP in recent years, so that he has no reason to be pleased by the shakeup in command.
"From a management standpoint, as a CIO, I have to look at how the company does in a variety of ways. Does it have an appropriate supply chain? [Is] the quality of the goods high?" Halamka asked rhetorically.
"From Harvard's perspective, there has not been any issue with delivery, pricing, customer service, or with any of their gear. From those indications, it appears that the company is incredibly well run," the CIO said. "At this point, I am certainly not going to give IBM or Dell a call because I am concerned about the change."
Yet Halamka does fret a bit that HP might be spreading itself too thin with some of its recent initiatives in the consumer space.
"Consumer goods clearly [take] an immense amount of effort. You do worry that a company that diverse is going to get distracted," he said.
To read about channel reaction to Fiorina's departure, click here.
"HP continues to straddle the enterprise and consumer markets," agreed Fitch's Nilaro.
But in Nilaro's estimation, this sort of diversity is actually a plus. "It's a logical extension to go from the imaging and printing segment into PCs and digital cameras," he said.
HP's current credit rating reflects its strong balance sheet and liquidity, along with its financial flexibility and "solid industry position," according to the financial analyst. But also factored in is the breadth of its product line, the stability of certain service offerings, and "recurring and wide geographic revenue bases."
HP's credit rating outlook could become even more favorable if HP "shows that it's able to succeed" at continuing to grow its current software portfolio, according to Nilaro. "But at the end of the day, service capabilities and execution are even more important [to customers] than a strong credit rating," he told eWEEK.com.
A few years back, Fiorina steered HP through a merger with Compaq that's been widely heralded as opening up new doors with consumers, among other markets.
"Whether that merger was a good thing or a bad thing, I had no faith [at the time] that [HP] would get it done. Regardless of what's happened since – or what will happen going forward – [Fiorina] deserves a lot of credit for that," said IDC's Parker.
Meanwhile, some Wall Street analysts have been speculating that, instead of pursuing the course set by Fiorina, HP will ultimately sell off parts of its business. "But it's still way to early to tell about anything like that," Fitch's Nilaro told eWEEK.com.
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