HP – a train wreck that has already happened

HP is trying to become Tiny Blue, but it is 7 years too late.

HP Logo 63x39 HP – a train wreck that has already happened

Some of you old timers may remember what happened 7 years ago. IBM sold their PC division also known as PC Company to China’s Lenovo and bought Rational Software in order to concentrate on the more lucrative software and consulting business.

Now HP is trying to pull the same stunt as IBM, but they just happen to be 7 years too late.

There are, however, several major differences. First of all in the 7 years since IBM sold off PC Company the PC market is much less attractive than it was back then. Also, remember how HP got to the top position in the PC world? They bought Compaq for $25bn.

Now it remains to be seen how much HP can scrape together for its PC business. HP has publicly stated that it will isolate the PC business in a subsidiary and try to sell it, but that it may take between 12 and 18 months.

During that time frame it is a safe bet that many of the customers – especially corporate customers will go away. Who wants to buy a PC from a company that is trying to sell its business?  What will become of agreements, support systems and any of the things corporate customers pay extra for?

And then there is the printer business. In many cases HP has sold computers and printers together in retail, but when they drop out of the PC business it will be much more difficult for them to sell printers.

Then there is the whole mess about the acquisition of Autonomy.  The purpose of buying British software company Autonomy may seem just as smart as what IBM did, when it bought Rational.  The difference is, however, that a lot of the low hanging fruit in the consulting business and integration market has already been picked by the likes of IBM. Therefore HP is facing much stronger competition than IBM did 7 years ago.

On top of all this the Touchpad fire sale started last night with the Touchpad selling for as little as $99 at Best Buy.  They apparently had a huge problem selling Touchpads even before the cancellation.

And finally a problem that no one has mentioned. What happens to HP Labs? The much respected research arm of HP that just a few years ago came up with the memristor that HP is now licensing to Hynix.  Will HP Labs also disappear and will IBM and Intel be the only companies left with serious research capabilities?

All in all this does not bode well at all for HP – and it is no wonder that the stock prices dropped by around 20% in trade by Friday of last week.S|A

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