HP Feeling The Sting Of Change

Disruption is an overused word, these days, but even if you’re sick to death of hearing it, you can’t deny that change has swept over HP, a long-time enterprise stalwart, and it’s feeling the effects in a big way.

By now you’ve heard that HP plans to spin its PC and printer division off into a separate company, while moving their corporate servers and services under the name Hewlett-Packard Enterprise, all under the auspices of making them more nimble. Oh yes, they definitely need to be more nimble, but for the record, it’s an idea that former CEO Leo Apotheker recognized over three years ago when he proposed spinning off the PC division.

HP has faced some serious challenges in recent years, not the least of which has been lack of stability at the top of the organization. Carly Fiorina was fired on February, 2005, then came Mark Hurd who was fired in August, 2010 amid a growing sexual harassment scandal. He was replaced by Apotheker, the former SAP boss who lasted less than a year before being replaced by current CEO Meg Whitman.

Step right up, folks. You can’t tell the HP CEO without a scorecard.

To be fair, Whitman has brought some level of stability to the company since she came on board three years ago and she is finally dusting off Apotheker’s playbook and spinning off the PC division (along with printers) just as he proposed before he was summarily dismissed.

Of course, Whitman inherited a company in turmoil. How can we forget the fiasco that was HP buying Autonomy for an over-inflated price of $10B in August, 2011. Many at the time were shocked by the price tag, and it didn’t take long for the deal to blow up on HP. Just a year later came the 8.8B write-down and bitter accusations of questionable bookkeeping practices and fraud. It wasn’t pretty and that battle continues to this day.

Then there’s the matter of layoffs. They began as a matter of policy under Fiorina, but today they have reached new heights. Last spring, HP announced a massive layoff of at least 35,000 employees. There is chatter this morning that could be 55,000. That’s a lot of jobs and it points to that D word, disruption. Big companies like HP have a lot of momentum in their favor, but they reach a point where they can no longer move quickly enough to compete, and by the time they do it’s often too slowly and too late.

To that end, HP has tried to pivot its enterprise business this year to the open source, private cloud operating environment OpenStack, certainly a wise move on its part, but they have found the market crowded with competition from other big names including Red Hat, IBM, Cisco and others (companies that are dealing with their own level of disruption).

HP has taken this leap seriously and has reportedly surpassed Red Hat as the top contributor to the next release of OpenStack, code-named Juno. Make no mistake, it’s a big deal, and it shows commitment, but is it enough?

Just last month HP bought enterprise cloud startup Eucalyptus and hired its dynamic CEO Marten Mickos to run its cloud division. It was a good move by all accounts and it gives HP a bit of a lift, one they badly need, but once again HP is playing behind the market and it’s not clear how much of an impact these machinations will have on the future of the company.

As analyst Horace Dediu pointed out on Twitter this morning, the spin-off maneuver is never really a sign of a healthy company.

HP is in the process of pushing buttons and pulling levers and trying things and hoping something sticks. Spinning off the organization into two companies is such a move. It’s worth stating that disruption is not a fait accompli of course. Companies can and have come back and HP still has resources and moves to make, but it’s feeling the sting of change and finding a way to transform a company the size of HP in the midst of a major industry shift, is not an easy task and Meg Whitman is facing a monumental challenge as she attempts to guide the company through it.