HP Girds for War: Dell, PalmOne Are Targets

A lot can be drawn from watching the initial moves of a new CEO. In Carly Fiorina’s case those moves were building an empire and driving a fast path to becoming the largest company, as well as the most visible CEO, in the segment. Both goals were achieved, but afterwards Fiorina lost focus and ultimately, she lost the job.

Mark Hurd is clearly a different kind of CEO; his background would indicate a 180-degree difference from Fiorina.

Where she was strong with marketing skills and personal charisma and weak in operations, Hurd is an expert in operations but seems weak in marketing — and he is not known to be charismatic. Where she was strong on vision but weak on basic people management skills, Hurd is not seen as a “vision guy” but is lauded on his ability to gain and maintain the loyalty of his staff.

Hurd’s weakness may be in long-term vision and in understanding both the importance and execution of marketing, which is why his selection of the marketing manager, Cathy Lyons, from the strongest HP division (printing and imaging) was so important, because it infers that he understands and has addressed this weakness. In addition he retains Shane Robison who manages one of the strongest, most visionary organizations in the industry. However, for the purpose of this column, we will focus on his selection of Todd Bradley to head HP’s PC Division.

Why PCs, Handheld Computers Are Important

As IBM recently rediscovered when it sold its PC division to Lenovo, what people touch has a great deal to do with how they perceive, and whether they perceive, a company. For IBM the ThinkPad, in particular, was the visual embodiment of the brand and of IBM as a whole.

This lesson was further driven home when we observed Apple, which had become little more then a joke in the PC market, reemerge as a visible power again, not because of a personal computer, but because of a little hard drive-based music player. What is especially amazing is that, in this case, two other low-profile companies — Creative Labs and RIO — had dominated this market and it was going nowhere fast until Apple entered. The resulting extra revenue and visibility improved both Apple’s image and its market valuation.

The best example of this lesson in recent years, however, was Palm. While still a division of 3Com the company’s limited Stock Offering was so popular that the market gave it a value that exceeded that of most multi-national companies. People had touched and used Palm’s devices and that alone created demand for Palm stock that exceeded, by a massive amount, the value of the parent company at that time, let alone that of bigger firms like GM.

The lesson learned — and the Palm lesson is most important — is that investors and buyers get excited about products and companies that are personal. It should be no surprise to anyone that HP’s board is looking for HP’s stock to move positively based on Hurd’s execution.

Market reports indicate that IBM is paying a high price in the general enterprise market now due to its PC division divestiture and while the ThinkPad never had the cache of the Palm or the iPod, the division was the only one at IBM that had the potential to address this opportunity. Interestingly enough, now as part of Lenovo, the combined entity now has a set of consumer offerings that could emerge as the next iPod or Palm.

While the IBM divestiture certainly created an opportunity for HP against IBM, which reports indicate they are taking advantage of, it also creates an emerging risk with Lenovo which has had an alarming ability to gain additional funding and is clearly targeted at the same potentially massive opportunity.

As a result it is dramatically less likely that HP will spin off its PC division, both because the opportunity this division represents is so visible, and the downside to spinning out a division like this was so recently demonstrated. That is not to say that big companies can’t do stupid things, but Mark Hurd, unlike another CEO we could mention, is simply not known for eliminating critical tools.

The PalmOne Card

This is why the selection of Todd Bradley, the ex-CEO of PalmOne, is so telling. Bradley is credited with turning PalmOne around after it floundered under the previous administration. With similar reputation to Hurd, Bradley is seen as a very strong operations manager, good with people, but weak on marketing. At PalmOne he surrounded himself with a strong PR and marketing staff indicating he understood those weaknesses and addressed them directly. His departure from PalmOne was negatively received by the market earlier this year as he had been credited with not only turning PalmOne around but in taking out Sony.

It is the Sony experience that should play the best here. Sony should have been beyond PalmOne’s capability as a competitor. Vastly better funded with an international brand that was one of the strongest in the industry, Sony had the leading gaming system and, in the Walkman, what had once been the hottest personal technology product on the market. Sony has a massive retail presence and deep product lines that bracket their products, including one of the strongest consumer-focused PC lines in the world.

PalmOne couldn’t compete, and in fact Palm had been getting roundly thrashed by Sony prior to Bradley’s tenure. However, under Bradley’s leadership PalmOne not only beat Sony, it helped force the rival company out of the handheld computer business altogether. While some of this was due to Sony’s mistakes — and Sony is famous for those as well — it was a solid focus on the customer and the business that turned PalmOne into the comeback kid in its segment.

HP’s PC Business: Going to War

This is the skill set Hurd is hoping to get out of Bradley at HP. To beat Dell, and strangely enough, PalmOne, HP needs to raise the bar and focus on the customer with products that anticipate where that customer wants to be, not simply copy what others have done.

Part of the reason I believe Bradley left PalmOne was because he wanted to create a relationship with Microsoft to drive into the corporate market with the Treo. I expect we will very quickly see a product from HP that combines the advantages of an all-in-one Treo-like phone with the Microsoft platform to address this opportunity.

I also expect we will see HP begin to push the bar more as Dell has clearly been schooling HP of late in PC hardware innovation, and this is something that clearly won’t sit well with Bradley, who helped drive some of the most interesting improvements to PalmOne’s line.

For Bradley, as it is for Hurd, one of the most difficult parts of the job will be learning how to operate in HP’s culture and how to quickly identify critical human assets and opponents. Bradley’s selection is further demonstration of Hurd’s skill in this area. We now wait to see how Bradley will build his team. In HP, the changes may seem vastly more subtle then they were under Fiorina, but they also seem to have more material substance and this, in the end, is what often makes for a successful company.

Rob Enderle, a TechNewsWorld columnist, is the Principal Analyst for the Enderle Group, a consultancy that focuses on personal technology products and trends.

1 Comment

  • "Hurd is not seen as a "vision guy" but is lauded on his ability to gain and maintain the loyalty of his staff."
    You are kidding right? Since he has joined the company his main priority has been to lay off staff and move all of Qualifications support to India to save money. Staff moral and loyalty are at an ALL TIME LOW.

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