Most resellers I’ve spoken to this morning have given me the same stories over and over again. First, while HP’s acrimonious purchase of Compaq is almost three years old now, many resellers still didn’t like the deal and the path that HP went down after it bought the Texas-based PC manufacturer.
Jason Perlow, president of Argonaut Systems, a systems integration company in northern New Jersey, spoke for many when he said, “HP has lost a lot of momentum since the Compaq merger. It was a bad, bad move for the company with little value-add, and it was a huge distraction in time and resources.”
In particular, they haven’t cared for the way that Hewlett-Packard has lost its focus on what were once its bread-and-butter lines of high-end calculators, testing equipment and printers.
It also hasn’t gone unnoticed that the HP-Compaq merger still hasn’t come off in some ways. As late as last summer, HP started an internal investigation on why the integration of HP and Compaq implementations of SAP AG’s enterprise software was so badly bungled that it helped create a sales and earnings shortfall.
They’ve also not been happy with the service. “When push comes to shove, there is little incentive to push HP hardware and solutions over IBM ones because IBM always, always wins on services,” Perlow said.
There’s also not much to be done with HP’s margins, according to some resellers.
“Over six or seven years, we have seen HP in a transition from a high-margin to a low-margin company. Computers are becoming commoditized, and the 70 percent margins that we used to pay for workstations are gone forever,” said Bruce Perens, an open-source leader and former HP senior strategist for Linux and open source.
“But now HP does have to compete at that low end, a very difficult business requiring an almost ruthless focus on efficiency that is opposite of the corporate culture with which they went into this change.”
In addition, HP hasn’t done a good job of mixing and matching its products and services. “HP has failed to create a powerful, virtuous circle of cross-selling between services and product lines in the way that, for example, Accenture has done with outsourcing and consulting services,” said Douglas Hayward, senior analyst at Ovum.
Wasting time with Itanium.
Several resellers also said they feel that HP has wasted its, and their, time by focusing on Itanium.
“Itanium, upon which HP has been a partner with Intel, is a disaster. HP transferred its Precision Architecture, the basis of Itanium, to Intel, transferred its silicon designers to Intel, shut down its chip foundries, and all of this was tied into an Itanium partnership that will return nothing to HP,” Perens said.
Instead, several integrators, with roots in DEC and Compaq, would have much preferred to see HP continue with its shipping of the Alpha processor family.
Others remarked on this, saying that HP’s corporate culture had been destroyed by rounds of layoffs. After HP acquired Compaq, for example, the company cut 16,800 jobs.
Fiorina didn’t help herself either when in 2004, she infamously said at a conference in Washington about job outsourcing, “There is no job that is America’s God-given right anymore.”
There were calls then that there was certainly at least one job that could be outsourced: CEO of HP.
While some analysts have thought that these cuts were making HP “lean and mean,” resellers believe that HP quality—once a byword in the industry—has gone downhill. As one reseller put it to me, “I still sell HP printers if someone asks for them, but they used to be tanks. They’d run for years. Now, they look flimsy and they just don’t hold up well.”
So it is that some resellers, on hearing the news of Fiorina’s firing, are singing, “Ding-dong, the witch is dead.” But will Fiorina’s departure actually mean anything to HP or to its partners?
I’m none too sure that it will. HP board member Pat Dunn is now chairman, and during an analyst phone call on Wednesday morning, he said, “This is not a change related to strategy.”
So, we can expect more of the same old, same old with just a new leader?
One analyst I know, Stacey Quandt of the Robert Frances Group, said, “The door [is open] for the HP board to hire an executive to sell off pieces of the company, and the server and storage division would likely be on the top of the list. An asset-stripper CEO will most likely be Ms. Fiorina’s replacement.”
It may be necessary to break up Hewlett-Packard. IBM certainly seems to have done well by splitting off its PC business. Still, an asset stripper, from where I sit, is more likely to throw the baby out with the bathwater.
What HP really needs is to get in the wayback machine, not buy Compaq, and restart again. Failing that miracle, I can only hope that HP will recommit itself to producing quality products—rather than making deals and cutting expenses—and that by renewing its commitment to the channel, HP will shake off its recent failings and move forward once more as one of the best-of-the-best technology companies.
eWEEK.com Senior Editor Steven J. Vaughan-Nichols has been working and writing about technology and business since the late ’80s and thinks he may just have learned something about them along the way.
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