In my opinion, spinning off HP's PC business as a separate company is bad for 3 reasons:
1. Brand Equity Loss. "HP" means technology and innovation to many people. This iconic company has been contributing to American' technology growth since it was founded in the silicon valley. Consumers and business "dig" HP's PC because the brand means quality and performance. Should HP spins off their PC business, the new company will no longer be recognized as the same as "HP". If brand equity is lost, so does business. Good luck for hoping a Best Buy customer associate explaining to the customers that this X-brand PC is just the same as a HP product.
2. Reduced Cost Efficiency. "HP" as a whole has very high efficiency of leveraging their supply and manufacturing in cost control. When HP negotiates with their suppliers, from component vendors to system integrators (a.k.a. ODM), their suppliers see their business potential in the entire "HP pie". Not only HP has PC business, they also make printers, servers and other system infrastructure equipment. For a lot of their vendors, many of them apply the business strategies of losing money or breaking even at the PC division, and hope for making money from HP's other divisions after "getting their foot in the door". Similar situation exists for HP's manufacturing facilities. However, if HP spins off their PC business, I think HP would keep their high end Server business associated with their software IT solutions (think of Oracle, they bought Sun for their hardware). The result is that the new spin-off company no longer has the same bargaining power in front the vendors and ODMs. They can no longer enjoy extremely low manufacturing costs because the ODMs, like Inventec, Pegatron, Quanta, etc., will now have to deal with HP separately for the high-margin business. Without world-class cost control and manufacturing efficiency, the new spin-off company is deemed for failure competing against Dell.
3. Ever Shrinking Business Potentials. PC is at its middle age. Sad to say, but its market size is shrinking. The once glory days of personal computer are long gone. Spinning off a business with the intention of winning in the PC market is boring and risky at the best. Knowing that the business's future is shrinking, no investor will even dream for the new company to grow, let along fast. The PC industry is highly consolidated due to severe price erosion, and most OEM players are in Asia - Lenovo, Fang Zheng, Tong Fang, Asus, Acer, Toshiba, Sony, Pansonic, NEC, Fujitsu, etc. The last two standing American companies are Dell and HP, while HP has one of its knee on the ground.
HP successfully made the spin-off Agilent. Agilent successfully made the spin-off Avago. But I highly doubt HP will be successful spinning of their PC business. Or if they're successful (i.e. cashing out), the new company may not be successful.
Here is my proposal, should HP's board finally decides to spin-off their PC business, please rename the company Compaq.
Showing posts with label HP. Show all posts
Showing posts with label HP. Show all posts
Tuesday, August 30, 2011
Thursday, August 25, 2011
Acer Chairman is Wrong - Tablet is Here to Stay and Prosper
According to DigiTimes, Acer chairman JT Wang believes "tablet PC fever" is "cool down". When this story was reported by Slashdot, it was called "Acer CEO Declares a Tablets Bubble". I think Acer's chairman is dead wrong.
I talked that HP made a fatal mistake when the company decided to enter the tablet market. The situation is perhaps better in the Android world because most of other tablet OEMs adapt Google's tablet OS. The combined mass creates a comparable Apps developer community to Apple's. However, just because HP decided to quit the tablet market, it does not imply that the consumer no longer need tablets. And certainly, there is no "tablet bubble"!
Looking at Apple's iPad sales in quantity, the numbers grew quarter by quarter and year by year. Apple is projected to sell 30Mu iPad in 2H'11. There are many out there waiting for the iPad 3 coming with higher resolution, from existing iPad and iPad 2 owners, as well as those "I don't have an iPad" consumers. I believe consumers love and want to buy tablets, at the right price and with iPad-comparable performances. The reason I say so is because in the tablet market, there is only one player dominating with huge profits, Apple. That says market demand is larger than supply, and competitions cannot keep up.
Apple basically caught their competitions by surprise. No one knew Apple worked on the product for several years. After iPad was released, Apple's competitors scramble to follow, but they had much less time for both the hardware and software development. In combination, the final products are offered at comparable prices to the iPad, but with sluggish software performance. Just because the PC OEMs cannot compete, it doesn't mean there is a "bubble". Nobody is throwing money away like crazy as in a true "bubble" situation. And for those who can deliver a tablet fitting consumer needs, there is still plenty of money to be made.
I believe in the next a couple of years, we should see strong contenders to Apple's iPad (3?). I think that pack would be led by a Nokia-made tablet running Windows 8 and a Motorola Mobile-made tablet running Android. For the rest, Samsung, hTC, LG, Asus and even Acer, they should either quit tablet and stay with PC, or become much better in their designs. Just don't call it a "bubble".
I talked that HP made a fatal mistake when the company decided to enter the tablet market. The situation is perhaps better in the Android world because most of other tablet OEMs adapt Google's tablet OS. The combined mass creates a comparable Apps developer community to Apple's. However, just because HP decided to quit the tablet market, it does not imply that the consumer no longer need tablets. And certainly, there is no "tablet bubble"!
Looking at Apple's iPad sales in quantity, the numbers grew quarter by quarter and year by year. Apple is projected to sell 30Mu iPad in 2H'11. There are many out there waiting for the iPad 3 coming with higher resolution, from existing iPad and iPad 2 owners, as well as those "I don't have an iPad" consumers. I believe consumers love and want to buy tablets, at the right price and with iPad-comparable performances. The reason I say so is because in the tablet market, there is only one player dominating with huge profits, Apple. That says market demand is larger than supply, and competitions cannot keep up.
Apple basically caught their competitions by surprise. No one knew Apple worked on the product for several years. After iPad was released, Apple's competitors scramble to follow, but they had much less time for both the hardware and software development. In combination, the final products are offered at comparable prices to the iPad, but with sluggish software performance. Just because the PC OEMs cannot compete, it doesn't mean there is a "bubble". Nobody is throwing money away like crazy as in a true "bubble" situation. And for those who can deliver a tablet fitting consumer needs, there is still plenty of money to be made.
I believe in the next a couple of years, we should see strong contenders to Apple's iPad (3?). I think that pack would be led by a Nokia-made tablet running Windows 8 and a Motorola Mobile-made tablet running Android. For the rest, Samsung, hTC, LG, Asus and even Acer, they should either quit tablet and stay with PC, or become much better in their designs. Just don't call it a "bubble".
Wednesday, August 24, 2011
HP did what others not dare
The story of HP quitting the tablet market is no longer news. Tech world has a much faster clock rate than many other industries. Things happened a week ago can be obsolete, but I think this story will remain as a marketing textbook classic.
The truth is HP made a fatal mistake. Just because almost every other competitor attempts to take a slice from the "iPie", it does not mean HP can win a feasible business out of the competitions. The TouchPad was poorly designed from an industrial standpoint. Its WebOS does not have the critical mass compared to iOS and Android. Thus, there is much less commitment from the developer community to contribute 3rd party Apps. And Apps is what makes Apple iPad stands out among the competitions. Releasing the TouchPad and fighting the battle against Motorola, Samsung, hTC and many others simply means HP would have to continue pouring money into the business for the sake of keep its gambling seat.
There of course is a blame war ongoing. Many would say HP should have not purchased Palm in the first place. Arguably, Palm's later mobile phones are not that great also, let alone the TouchPad. And the general manger whoever decided to enter the table competition should get fired. Many would also say that HP's board should also take responsibilities. All true, but it does not matter anymore. In business, this is considered as sunk cost. Mistakes were made, resources and capitals were spent, and nobody can reverse it. The key is what To do now. I think HP's board made a plausible decision that they have the guts of calling for a quit without further wasting of company's resource.
In many business opportunities I saw, some companies do not have the dare to admit their marketing mistakes. The marketing people didn't do the job properly (e.g. draw a "big pie") or didn't dare to stop their management from madly chasing competitions. They kept fighting the war even though they knew there would be no money made no matter how long it lasts. Companies do not easily quit for many reasons. Beyond the internal politics (a money-losing business is always a trap topic in the board room), companies are typically hesitate because quitting early often leads to credibility damage at the customers. However, sometimes, admitting a mistake and re-strategize the company can save huge amount of resources and set things right once for all. That's what I believe HP did. For an innovation driven company like HP, living with 20-30% gross margin for a product is not acceptable. HP has to "up sale" itself as a technology provider, a solution vendor, and a business partner for their customers. Killing the TouchPad and easing out the PC marketing marks a transition point for the company.
No one knows if HP's new CEO and the board can pull this off. For a company that's worth $60 Billion (before the 20% stock price drop), steering this gigantic ship is no easy job. There are the two obvious possibilities in ten years. If HP succeed of transitioning itself and become another IBM-like company, quitting the consumer electronics market would be marked as a classic business success story. Else, this move will be considered as a self-sabotage action that severally damages HP's business future.
Either way, I believe HP did what many others not dare.
The truth is HP made a fatal mistake. Just because almost every other competitor attempts to take a slice from the "iPie", it does not mean HP can win a feasible business out of the competitions. The TouchPad was poorly designed from an industrial standpoint. Its WebOS does not have the critical mass compared to iOS and Android. Thus, there is much less commitment from the developer community to contribute 3rd party Apps. And Apps is what makes Apple iPad stands out among the competitions. Releasing the TouchPad and fighting the battle against Motorola, Samsung, hTC and many others simply means HP would have to continue pouring money into the business for the sake of keep its gambling seat.
There of course is a blame war ongoing. Many would say HP should have not purchased Palm in the first place. Arguably, Palm's later mobile phones are not that great also, let alone the TouchPad. And the general manger whoever decided to enter the table competition should get fired. Many would also say that HP's board should also take responsibilities. All true, but it does not matter anymore. In business, this is considered as sunk cost. Mistakes were made, resources and capitals were spent, and nobody can reverse it. The key is what To do now. I think HP's board made a plausible decision that they have the guts of calling for a quit without further wasting of company's resource.
In many business opportunities I saw, some companies do not have the dare to admit their marketing mistakes. The marketing people didn't do the job properly (e.g. draw a "big pie") or didn't dare to stop their management from madly chasing competitions. They kept fighting the war even though they knew there would be no money made no matter how long it lasts. Companies do not easily quit for many reasons. Beyond the internal politics (a money-losing business is always a trap topic in the board room), companies are typically hesitate because quitting early often leads to credibility damage at the customers. However, sometimes, admitting a mistake and re-strategize the company can save huge amount of resources and set things right once for all. That's what I believe HP did. For an innovation driven company like HP, living with 20-30% gross margin for a product is not acceptable. HP has to "up sale" itself as a technology provider, a solution vendor, and a business partner for their customers. Killing the TouchPad and easing out the PC marketing marks a transition point for the company.
No one knows if HP's new CEO and the board can pull this off. For a company that's worth $60 Billion (before the 20% stock price drop), steering this gigantic ship is no easy job. There are the two obvious possibilities in ten years. If HP succeed of transitioning itself and become another IBM-like company, quitting the consumer electronics market would be marked as a classic business success story. Else, this move will be considered as a self-sabotage action that severally damages HP's business future.
Either way, I believe HP did what many others not dare.
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