H-P Struggles to Move Past Poor Strategy Moves
Hewlett-Packard (NYSE:HPQ) is expected to fire CEO Leo Apotheker, but the company might struggle to find a new leader able to revive the computer maker after a series of ineffective strategy shifts and downgraded forecasts.
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“It’s not going to be easy,” said Michael Mullaney, who manages $9.5 billion, including Hewlett-Packard shares, at Fiduciary Trust in Boston. “They have to go back and redefine what they want to be as a company, go back to the drawing board.” The company has been witnessing a slump in sales of its personal computers, and recently announced that it would split its hardware and software businesses.
Former eBay (NASDAQ:EBAY) CEO Meg Whitman, a Hewlett-Packard director, may be appointed interim leader, while Todd Bradley, who runs Hewlett-Packard’s PC unit, and David Donatelli, head of the business in charge of servers, storage, and networking may be among the candidates for the permanent position. H-P might also look to Gary Moore, chief operating officer of Cisco (NASDAQ:CSCO), or Steve Mills, who runs the software unit at IBM (NYSE:IBM).
H-P board directors met yesterday in committees and will gather today as a full board in order to discuss Apotheker’s future with the company. They will also reconsider a proposal to spin off the PC business, a move that Apotheker announced was under consideration on August 18, the same day H-P agreed to buy software maker Autonomy for $10.3 billion and said that it would discontinue products running its WebOS mobile software, including its TouchPad tablet, which failed to compete with Apple’s (NASDAQ:AAPL) iPad.
Apotheker’s goal with the Autonomy purchase was to shift the company’s focus from lower-margin consumer products to more profitable corporate businesses such as servers, software and network services. However, Apotheker was unsuccessful in communicating the company’s vision to shareholders, a task that will be left to his successor, said Tony Ursillo, an analyst at Loomis Sayles & Co. in Boston, which owns H-P shares.
Hewlett-Packard’s technology solutions group, which includes services, software, and enterprise storage and servers, gained 14% in the third quarter, climbing to $15.9 billion. In contrast, revenue from sales of personal computers, tablets, and other consumer products fell 3.3% to $9.59 billion. For that reason, the company is considering focusing the former business while divesting itself of the latter, but it will hard convincing everyone that that’s the right move.
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Hewlett-Packard’s board needs to find a new leader who can build a company to rival the biggest providers of technology for corporations, namely IBM (NYSE:IBM), Oracle (NASDAQ:ORCL), and Cisco (NASDAQ:CSCO). If Apotheker is out, the company will have to move fast, as its share price has already declined 44% this year.