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Summary:

Gulp. Meg Whitman says Hewlett-Packard is back in the buying mood — but not for Autonomy-sized companies — to boost its product portfolio.

Can acquisitions speed up Hewlett-Packard’s slow-motion turnaround plan?

I can’t believe I’m even asking that question. Scrolling back to HP’s earnings call Wednesday night. Just minutes after announcing a management shakeup and dismal third quarter results, including revenue falling 8 percent to $27.23 billion compared to $29.67 billion last year, HP CEO Meg Whitman admitted that the company is looking at acquisitions again. The Financial Times characterized her statement “the scariest words in English when spoken by the boss of Hewlett-Packard.”

She phrased her statement — made in answer to a question — carefully.  Whitman’s full quote from the call (transcript here) was:

 “So we now have an opportunity to say where can we use strategic acquisitions to further our overall objectives as a company and we will be back in the market as we think about acquisitions that can further our objectives. Again we will be incredibly measured and disciplined. We are very mindful of the event that we just came off with Autonomy.”

Ah yes, Autonomy. That was the $7+ billion acquisition in 2011 that resulted in gargantuan write-downs and a fraud investigation. Hard to forget.

More acquisitions? I don’t get it

The idea that HP’s salvation lies in buying yet more technologies and products for its already huge and confusing portfolio defies logic. Outside of Autonomy, acquisitions have  been a mixed bag for HP. Palm (bought in 2010 for $1.6 billion) hasn’t — to put it charitably — done much.  But the company always touts 3Par storage, for which it paid $1.6 billion, as a success story.

HP’s problem stems not from lack of products but from a confusing array of too many products that people don’t want. And from an outdated enterprise sales model that is foundering in the age of cloud computing. The lack of compelling new products coming out of HP R&D is testament to the fact that R&D was gutted under the previous Mark Hurd regime.

HP, other legacy players, are hamstrung in brave new world

One CIO in the hospitality industry exemplifies what’s happening out in IT land. This exec, who requested anonymity, barely buys any server-room hardware at all anymore. And what software he buys is via a SaaS model so he doesn’t care what it’s running on or where it runs, as long as it runs:

“Enterprise IT buyers are not going to be as interested with infrastructure. Who cares what the applications run on? In my four years I was approached all the time by the HP Blade rep. We talked about baseball and that’s it. Our infrastructure is hosted or consumed by a packaged application.”

Those outsourced HP apps might run on HP blades, but somehow I doubt it. And in any case, he clearly doesn’t care.

If you think I’m being too hard on the HP, Wall Street was similarly unimpressed with HP’s progress. There are even hints that Dell-like shareholder activism could loom.

As Sanford Bernstein analyst Toni Sacconaghi put it in his post-call report:

“With Whitman’s turnaround now “officially” behind plan, we wonder if we might see increased clamoring for more radical action by either the Board or outsiders. Our thesis on the stock has been that either Meg Whitman improves company performance or the Board (or activists) will break up the company; our sum-of-the-parts analysis suggests a value of ~$34, and we note that as of HP’s aftermarket price, the stock was comfortably the least expensive stock in the entire S&P.”

  1. Caroline Olsen Friday, August 23, 2013

    I placed my Looking Backwards (from Leo Apotheker | My Life) in the microwave for 60 seconds for you all. Now, if you’ll excuse me, I must slip away. I have work to do.
    http://leoapotheker-mylife.com/2011/12/leo-apotheker-2011/
    Honestly, do you believe in Meg Whitman??

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  2. Marc Heatherington Friday, August 23, 2013

    HP needs to buy into 3D printing.

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    1. Yes – just goes to show you how bad HP management (still) is. HP has invested tons of $$ in printing technology – yet, somehow they missed 3d printing. As with everything these days at HP – they will probably buy themselves into this market too late.

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      1. this is a really good point. has HP said/done nothing in 3d printing?

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  3. John Thompson Sunday, August 25, 2013

    I couldn’t agree more. In general few acquisitions work out, except for VCs and founders. HP in particular needs to focus on streamlining its existing technologies, instead of adding more confusion to the mix. Or, ideally, grow organically, a la Google or Amazon. Now growing organically requires top talent hires, which admittedly will be difficult for HP to snag under its current circumstances.

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    1. HP is actually working on 3D printing. They can’t afford to enter the market as of now (it cost billions to create/market new products and the market is just not big enough at the moment) but the labs are on it, and once the debt has completely disappeared I think we will see some movement on the 3D printing side from HP!

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  4. HP isn’t the only traditional IT vendor struggling to respond to changing market needs. IT has made it quite clear what they seek, and to Barb’s point, it’s not blade servers. Rather, IT is focused on an IT-as-a-Service strategy facilitated by hybrid clouds that support the business by providing the backbone for innovation acceleration. The Cloud Empowered Enterprise is here. For more of my view, here is an interview from the GigaOM Structure show floor: http://www.youtube.com/watch?v=RGLSMydiJyM

    – Shawn Douglass, CTO, ServiceMesh

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