HP’s golden goose

I am a former Engineer at HP, and I left after getting fed up with the constant reorganization, ongoing staff cuts and outsourcing. Under Joshi, HP’s employees became ever more demoralized with every reorg/layoff. I wouldn’t expect much in the way of innovation under such conditions and such short sighted management. HP competitors such as Samsung gleefully rolled out the red carpet for displaced HP talent. It might be more accurate to say that Joshi is the one who killed the goose that laid the golden eggs.

As the PC converges with other consumer devices like TVs and audio where even Sony can’t make a decent profit, and with the handheld market that is dominated by Apple, Samsung and LG, HP is forced into the back-end systems that are invisible and incomprehensible to most investors and analysts.

HP’s strategy there is to be the engine that replaces old labor-intensive technology like offset printing presses and mainframe computers with high-speed digital presses and virtualized servers. This is good for everyone except the customers who have to endure the inevitable disruption and the displaced employees who lose their jobs in a depressed economy.

HP lost it’s way over 8 years ago when they picked an outsider to run the company, Fearena, herd mentality,
spend boatload of cash to buy CPQ, and EDS, slash workforce and stifle innovation.

HP might want to consider a strategic acquisition to get upstream in the printing business. Despite all of the mistakes Xerox has made in the past, they do make excellent products. There could be many synergies–sales force, manufacturing, managed services- in an acquisition, especially at the current valuation of Xerox.

HP is currently planning to build a support center in Rio Rancho, NM. Though this may seem like a turn around from the past few years of outsourcing these types of jobs to India or other countries, the reality is now beginning to take shape. U.S. workers are being told they must move to New Mexico or lose there jobs. Since the deal HP cut with NM governor Bill Richardson allows for up to $50 million in tax breaks, it also stipulates that the jobs at this new support center must be filled by new hires who have been NM residents for at least a year. So where does this leave the current workforce?

Mark Hurd is not a visionary, he’s simply an operational cost cutter. It means he does everything he can to milk the company cash cows as long as he can, while starving future innovation. But, in the meantime he’ll make absurd bonuses and can grab the golden parachute when it comes crashing down.

Only the dowdy and dopey engineers left after a decade of steady shedding of their best. The other employees are managers and managers of managers who don’t contribute anything of substance.

What they manage to do is sit back and watch their partners succeed – PCL was the printer language when Adobe introduced the concept of pdf. When Nokia was born, HP was the king of microwave and handheld computer technology. Cisco was a small startup company when HP led the world in networked computers. The list is endless, and HP has only succeeded at buying sunset companies like Compaq and EDS.

I would not be so sure that HP is not cutting too much too fast.

HP is cutting costs at all costs. Innovation is a thing of the past as HP converts market share into management bonuses.

It’s the classic dilemna of a “reform” CEO. Mark Hurd came to HP, fixed some specific operational and political problems, and the stockholder saw a big benefit. But now that HP is operating as well as can be expected given its size and market conditions, what can Mark do to keep up his reputation for “big” improvements?

The answer is: short-sighted and deep cuts to keep the numbers looking good on a quarterly basis, then pray for a miracle like the inkjet or the iPod to rescue him. Otherwise, he can keep his job for a few years, riding HP back down into the mud until the shareholders rebel and throw him out.

Financially he will win either way, pulling $100 million or more out of HP as his total compensation. Or he may leave sooner if another star-struck BOD offers him a chance to “rescue” another company with an obscene compensation package. But the time for “big improvements” at HP is over. What HP needs now is a steady hand with experience at running a mature mega-company. Mark Hurd may not be that guy.

Printers are the ‘buggy whips’ of our time, and ‘cars’ are storming the world. The only innovation in printing is “not printing”. It’s over HP… get used to it.

Has HP cut too far? HP used to invent entire new catigories of business – consumber printing being just one example. Apple still does this with examples like IPOD. HP has not created a new market since consumer printing 15 years ago. And with all the cuts anounced and still to come, it never will again.