Computer Weekly Editor's Blog

Oct 9 2014   5:14PM GMT

HP split fails to answer questions over long-term future

Bryan Glick Bryan Glick Profile: Bryan Glick

Tags:
Autonomy
Cloud Computing
EDS
Hewlett-Packard
HP
Leo Apotheker
Palm

Leo Apotheker must be tearing out whatever hair he has left. The former HP chief executive was sacked in 2011 less than a year into his reign for having the temerity to try to sell off the IT giant’s PC division.

Three years later, his successor Meg Whitman announced this week that after extensive planning during two years of a five-year “turnaround plan”, the future of HP is… to split off its PC and printers division.

As many observers have said in the days since her announcement: “Duh!”

HP has succumbed to the inevitable, realising at long last that trying to run a consumer-oriented PC / mobile business under the same umbrella as a corporate-focused IT infrastructure business is untenable.

IBM realised this years ago in selling its PC division to Lenovo – indeed, IBM has taken it further by also selling Lenovo its x86 server business this year. HP’s move leaves Microsoft and Dell as the only remaining big IT suppliers trying to combine significant consumer and corporate product lines.

Microsoft’s new CEO Satya Nadella has already faced calls to split off the software giant’s consumer business too – and it is noticeable how his language around Windows has changed to emphasise its enterprise IT strengths. Questions remain over Dell’s ability to maintain a PC business alongside its infrastructure products – but at least CEO Michael Dell no longer has the pressure of external shareholders to worry about since buying back the company he founded.

HP’s decision is as sensible as it was inevitable – even if it was three years late. But it hasn’t taken away a lot of question marks over the newly named Hewlett Packard Enterprise half of the company that will become the corporate IT infrastructure supplier.

The hardware business is in long-term decline – hence IBM’s server sell-off – and HP has allowed rivals and new entrants to out-innovate in most of its core future markets: flash storage, software-defined networking, cloud services and so on.

HP is no longer a technology leader in any of the key IT sectors – even in those where it remains the market leader thanks to its legacy customers. The company is pushing cloud heavily – and recently acquired cloud software specialist Eucalyptus to help – but is miles behind Amazon Web Services (AWS). It’s even miles behind Google and Microsoft Azure – themselves miles behind AWS.

Some observers have questioned whether HP will now sell off its IT services division – the former EDS, acquired for $13.9bn in 2008 before a $9bn write-down in 2012. Others have suggested further acquisitions or mergers – EMC in particular has been mentioned – but HP’s recent history of acquisitions is about as bad as it gets, with that $9bn EDS write-off followed by $1.2bn lost on Palm and $8.8bn on Autonomy.

For HP’s customers it has been a whirlwind – but most of them have HP so embedded into their IT infrastructure that it will take an extended refresh cycle before any worried CIOs choose to dump HP entirely. As a result, HP has been protected by its sheer size – it has, in effect, been too big to fail.

But now the supplier becomes voluntarily smaller, that protection starts to erode. It is easy to see a future where further parts of the company are sold off, where legacy businesses decline, and growth in emerging technologies fails to replace that revenue.

Will the historic Hewlett Packard name still be a major force in IT in 2020? It’s impossible to say, either way, with any certainty.

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