What’s the Value Proposition of the New HP Brand?
August 30 2011 by Bob Donnelly
After spending $19 billion in 2002 to buy Compaq Computer, $1.8 billion to buy Palm in 2010, and investing in money-losing tablets and smart phones this year, Leo Apotheker, the new CEO of HP wants to sell their core business?
When you think of HP what brand image immediately comes to mind? PC’s, laptops, printers – right? They are the world’s largest PC manufacturer. It’s what sets them apart from their competitors and is encapsulated in their value proposition. No wonder the stock went down 20 percent on the restructuring announcement.
Just the thought of it makes you wonder – what’s the plan? Surely customers will now look elsewhere, which will further devalue the brand for potential investors.
What’s left? Printers and ink cartridges? Wasn’t the bundling of printers with computers what made HP what it is? If you take the PCs away ($30 billion of HP’s last nine months revenue of $95 billion), not only would there be a giant loss of revenue, but also an impact on ancillary sales of printers.
What was Leo Apotheker thinking when he made his announcement? What will be the value proposition of the new HP brand? Another IBM – how can that happen?
Just the thought of the transformation plan (whatever that is) is fraught with risk, certainly protracted, and costly. Given HP’s current challenges, this announcement could not have come at a worse time.
Since Apotheker has only been in the CEO chair for 10 months, how could the board go along with this poorly timed announcement? Without a buyer, or a clear plan, HP has instantaneously diluted the value of the brand and set in motion an all too familiar scenario.
Planning anticipates the inevitable
The introduction of the iPad signaled the demise of the PC. However, the market leaders in PCs — HP, Dell, and others, continued to invest heavily in PCs and laptops instead of embracing this obvious new innovation.
What we have today is a rapidly aging market for PCs with razor thin margins for what has become a commodity product. Likewise, the introduction of the iPhone set in motion a race for dominance in the smart phone market.
HP finds itself way behind the technology curve on both fronts and has already thrown in the towel on its feeble attempt at a smart phone and tablet. Given the dynamics of the market for computer-like tablets and smart phones, and the weak economic situation for the next few years, HP is now in a precarious position.
If the traditional wisdom of the Wall Street analysts holds true, with this announcement HP has positioned itself to be a has-been. Even if HP sells its PC business it will be left struggling to devise strategies to compete with market leaders IBM, Oracle, and Cisco, who are light years ahead of HP in their respective markets. For example, IBM in technical services, Cisco in computer networking equipment, and Oracle, IBM, and SAS in business software.
Unfortunately, Leo Apotheker is another CEO without a plan!