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Bumbling HP Strikes Again

As if its recent moves haven't been baffling enough, {complink 2376|Hewlett-Packard Co.} on Tuesday announced it would make more TouchPad tablets in its current fiscal fourth quarter “to meet unfulfilled demand.” Yes, you read that right. HP will be making more of the same TouchPad it is discontinuing simply because demand soared after prices were slashed.

I could only conclude somebody wants to turn Hewlett-Packard into the laughing stock of the high-tech world. The world's biggest high-tech company by revenue (yes, it's HP and not Apple) is bumbling from one misadventure to another and has boxed itself into a corner where few understand where it is headed and what will become of it. Recent events and actions taken by the company led me to this conclusion. Here are some reasons I think HP is in more danger than its management and board of directors realize.

About one week ago HP defanged its TouchPad tablet computer business by announcing it would stop making the devices — only 49 days after introducing the product. Then it hog-tied the Personal Systems Group PC hardware operations (the world's largest by revenue) by declaring its intention to exit the market, promising to evaluate strategic alternatives for the division. Meanwhile, as I pointed out in a previous blog, HP isn't even sure whether or not it will sell or spin off the PC business. (See: Muddled Thinking Sinks HP and Apple Can Be Beaten.)

To top it off, the company offered $10 billion for {complink 549|Autonomy Corp.} The offer represents a staggering one-fifth of HP's market value — for a software business that will represent less than 1 percent of HP's current sales.

The recent declaration about making more TouchPads is even more bewildering. In a blog headlined “More TouchPads on the Way,” HP thanked customers “for enthusiasm for this product.” Of course, customers were enthusiastic. Who wouldn't be — $99 for a product that was initially released for sale at $499? Here's more wacky talk from HP:

    Since we announced the price drop, the number of inquiries about the product and the speed at which it disappeared from inventory has been stunning. I think it’s safe to say we were pleasantly surprised by the response.

    Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand. We don't know exactly when these units will be available or how many we'll get, and we can't promise we'll have enough for everyone. We do know that it will be at least a few weeks before you can purchase.

So, HP is going to make and sell these TouchPads at a loss to satisfy pent up demand. What does it plan to do if customers keep asking for more of the product than it can supply? By the way, the decision to produce additional TouchPads doesn't mean HP will be bringing back the product or the webOS it acquired with the purchase of Palm Inc. HP is still getting out of the tablet PC market (I think) but please don't bet on this, because the management hasn't made up its mind what the company should be when it grows up.

None of these moves makes sense. Yes, margins are tight in PC and electronics hardware, but you don't give up because conditions are getting tougher, especially when you don't have anything else to fall back on. Many have likened HP's action to a similar move by {complink 2470|IBM Corp.}, which years back sold its personal computer business to Lenovo, but the comparison is inaccurate. IBM had a flourishing software and consulting business when it dumped the PC unit; not so HP.

Apple sells a bunch of products that many have described as margin sensitive, but the company has refused to accept the idea that the hardware business cannot be hugely profitable. As far as Apple's management is concerned, making and selling digital music players, PCs, and tablets does not mean settling for paltry margins. Instead, they created an ecosystem that gave Apple the margins it desired.

HP is giving up because its management doesn't have what it takes to win, and the board of directors is certainly not providing the backbone CEO Léo Apotheker lacks.

13 comments on “Bumbling HP Strikes Again

  1. prabhakar_deosthali
    August 31, 2011

    Since the time I know the name HP, i have always taken it as a company manufacturing OScilloscopes and later inkjet printers and carttridges. later  when I was working in IT departmebt I came to know HP as a server manufactuere. 

    With the acquistion of Compaq HP tried to become one of the top PC brand but they could never achieve that status and in the process also killed the Compaq brand.

     

    With current confusing moves, as you say Bolaji, HP is surely going to become a company not to be taken seriously anymore.

  2. JADEN
    August 31, 2011

    One of the most suprising moves from HP was its decision to spin off its PC business, an operation that has been their backbone for years, and a key component in its relationship with enterprise users.  Spinning it off now is telling what the future might look like for them.  For the company to be successful, it need to have a vision of what the future will looks like and what it can do to get there, it doesn't appear HP has future.

  3. Himanshugupta
    August 31, 2011

    And what would be the price of the tablets? I read an article which says that it costs HP around 319 USD to make a tablet. Now if they are planning to sell it for 399 USD then its foolish enough and if they want to sell it for 99 USD then its suicide. As now their touchpad are so much in demand (pun intended) and scarce, probably they should give touchpad free with each printer. This might help them in increasing the sales of printer.

  4. Anne
    August 31, 2011

    Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand . We don't know exactly when the se units will be available or how many we'll get, and we can't promise we'll have enough for everyone. We do know that it will be at least a few weeks before you can purchase”

    HP seems to be confused and it's like it lacks vision. How many Touchpads will be available to sell for their last run, they don't know for they can't promise to have enough for everyone, when will it go on sales, they are not sure when it will be available for purchase.  The company is confused.

  5. Barbara Jorgensen
    August 31, 2011

    You are right, Bolaji. I was with HP when they first announced the spin off of the PC business, but every move they have made since seems destined to de-value that division, and confuse those tracking their enterrpsie strategy.

  6. elctrnx_lyf
    August 31, 2011

    All these moves by HP certainly confusing for evey one. I wish they have a plan to do all this, but only in the worst dreams a company would decide to lose so much by selling a 500$ product at 100$. Surely I would luv to get one of these if possible. I don't care about the OS but I wonder does hp support any apps for this tablet in the future.

  7. Taimoor Zubar
    August 31, 2011

    More than confusing, I find it a bit ridiculous. HP plans to produce additional units of a product it will stop producing and one that it may not even support. Does it really think people will buy such a product? Even if the demand is there, I don't see why it had to slash down the prices. I agree with Bolaji here that HP is doing it's best to become the laughing stock in the electronics world.

  8. Mr. Roques
    August 31, 2011

    I'm also very confused about it… the stock has plummeted down since april '11 and if they don't make some smart moves, where will HP end up?

  9. Eldredge
    September 1, 2011

    While it may be true that HP will be losing money on each TouchPad that they sell, it sounds like their strategy is to make up for that in volume! Baffling indeed.

  10. Anna Young
    September 1, 2011

    @ Himanshugupta, I wonder too!  At what price will HP sell the tablets for? It is baffling. Evidently HP's management's decision to make more Touchpad Tablet' shows that its not just confused strategic wise, but seems to be in confused dot com planet.  I'm curious to know the final decision.

     

  11. DataCrunch
    September 2, 2011

    What is also confusing is that HP stated that they intend to continue to develop their WebOS mobile platform.   Perhaps this was a well-crafted publicity stunt to get people interested in their tablets.

  12. Ashu001
    September 2, 2011

    Bolaji,

    I have little doubt that we are very soon going to see Business Case studies at most universities focussed on HPs misadventures.[I can even see Christensen of the Innovators Dilemna coming out with a book].

    These statements were so true,

    HP is giving up because its management doesn't have what it takes to win, and the board of directors is certainly not providing the backbone CEO Léo Apotheker lacks

    This is what happens when a company does'nt have founders(or people with strong vision) in charge unlike at Apple ,Dell,IBM or Oracle.

    Nobody is willing to think long-term.This is typical Fortune 500 executive mentality today.Get your bonuses and leave as soon as possible after milking the company and brand dry.

    Regards

    Ashish.

     

  13. itguyphil
    September 3, 2011

    Dave,

    Don't they currently have some negative PR due to the TouchPad selloff?

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