Friday, September 23, 2011

The market welcomes the new Queen of HP very mildly...will she change the faith of the company as she did with eBay?

Meg Whitman, star of eBay is now at the helm of HP, after a short-lived 11 months reign of Léo Apotheker, so can we safely say: The King is dead, long live the Queen!?

"We would assume that most of this direction was the desire of the board when they hired Leo, so it's unclear if they wish to change this current strategy, or just change the messenger," wrote Louis Miscioscia at Collins Stewart.

I guess it's like with the current problems of the US economy: it's probably less about the real health of the economy than the lack of long term certainty of the direction of the decisions taken that weight on HP's stock right? So would it finally go up if Whitman makes a clear long term statement?

But still, her experience lies with a consumer-oriented dot-com, so "while we believe Meg has proven to be a very capable manager leading eBay from a start-up into a household name and one of the largest internet companies, there will be plenty of scrutiny given her lack of experience in the enterprise business," Sterne Agee analyst Shaw Wu wrote."

But we could see that in a more positive way, and imagine that this new appointment is a strategic one that would take advantage of the experience of Whitman with eBay, a consumer-driven company. It could be a new reversal of strategy towards the consumer market, perhaps to go back to Mark Hurd's vision rather than Léo Apotheker's exclusive business software one. Still HP made a 10 billion investment in a business software oriented firm, and that's hard to reverse, unless there is no planned integration.

I still believe that the company had an amazing opportunity to get into high-value consumer-driven market with the WebOS ecosystem: phone, tablet, appstore, cloud-services all sync together. I just wish the company would have used the Gillette razors' price structure: not making money on the hardware, but the value added services (cloud services and app-store). Also, if the Touchpad's bill of materials is about 300$ today, it will go lower with time/volume, and the price would have stayed the same, so even on the hardware it could have been profitable. Unfortunately, we all saw the mayhem that happened with the liquidation sale of the tablet way bellow the cost, and the exit of HP from the WebOS hardwares. It might still have this opportunity (or another one), but the company needs asap to decide where it's actually planning to go, communicate, communicate, communicate, and stick to the plan!

Anyway, as many analysts highlight it: HP needs a new strategy (or the confirmation of Léo's one), with a strong vision/mission statement and long-term commitment of the company towards that goal. As Goldman Sachs is "cautiously optimistic many of the strategic challenges are resolvable" but it "is also facing increasing cyclical and secular tailwinds".

Good luck HP! :)

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