It is said that a giant must fall either by force or by self-decision. Something of this sorts happened recently when HP (Hewlett-Packard), the largest seller of personal computers and laptops, decided to venture into a more profitable field of softwares by buying Autonomy, Britain’s largest software company, and sell their hardware units. This was expected from the giant as there is more respect in taking retirement than being thrown out of competition.
Youngistan meri jaan:
With the exponential growth of new computer companies like Dell and Lenovo due to their charming add campaigns and products, HP surely has lost its name as the mogul of computer hardwares. In developing markets like India, Dell has overtaken HP with its excellent advertising strategy targeting the youth (especially the college students). Dell’s marketing strategies have been very innovative; personally I like the idea of creating your own laptop online, whereas HP has stuck to the old school of thinking. Proof of this: just check the number of people who own an XPS in NITK!
Palmed Off:
Adding salt to the injury was the failure of Palm, HP’s attempt to make a name in the lucrative tablet business. HP tried its best to challenge the likes of Apple Inc and Samsung Electronics, currently the top two tablet making companies, with their TouchPad but it failed miserably due to hardware problems, and lack of applications when compared to iPad and GalaxyTab. Continuing to sell its own mobile devices ‘was no longer in the interest of HP and its shareholders’, in the words of Mr Apotheker, CEO, HP. To put it more bluntly, the business was haemorrhaging cash and would have continued to do so. But HP was lucky to have one good news from Palm, the success of webOS, which they are planning to get licensed to other companies or, extreme measures, sell it off too.
Autonomy:
Now let’s get down to the real business. The acquisition of Autonomy is a much bolder attempt to take HP into higher-margin territory. And a dear one: HP is paying the equivalent of 15% of its own current market capitalisation for a revenue increase of 1%. But Autonomy is the market leader in software to sift through “unstructured” data, such as documents, e-mails, photographs and phone calls. The quantity of such data has exploded: more than 80% of a typical company’s information is now unstructured! Firms who are involved in such digital piles have done well- Autonomy was hardly affected from the economic crisis. Proof of the earlier statement would be that Autonomy, along with its other acquisitions, has increased its revenue by 55% in just 5 years, this with the economic crisis in existence !
De ja vu:
After hearing HP’s case, one tends to remember a similar story which took place a few years back with another PC giant- IBM. Such radical moves were taken by IBM, which has surely taken them to the right direction.
New House Problems:
The new HP will be much less of a company selling gear to consumers than one building IT systems for companies and helping them manage their growing pile of digital information. But this transformation will be a very tough one. Apothekar having produced average quarterly results, called for patience saying that this shift is a multi-quarter effort, but unluckily the markets haven’t paid heed to his comments as shares of HP have taken a beating since the deal was struck. In the short run HP maybe criticised for the decision but in the long run it might turn out to be profitable, and there will be numerous corporate raiders who love to takeover HP and play the game in their own way.
