In the Silicon Valley, companies that started with two guys in a garage are almost cliché. Recently the company that started the cliché building fancy calculators for scientists announced they are loooking for a way out of the PC business. Can anyone name that company? You got it, HP, formerly named after the two guys in the garage, Mr. Hewlett and Mr. Packard. Leo Apotheker is the man at the top of HP today.
Sadly, not as cool as an iPad
So what does that mean to you, the business owner on Beach Street? What does it mean to the PC industry? Well let’s start with the question – Does anyone remember an IBM PC? Even after selling the popular Thinkpad line to Lenovo, even Lenovo took the IBM name off the Thinkpad. IBM doesn’t make or sell PC’s and yet IBM invented them.
I can’t think of a business that went out of business because IBM quit selling PC’s. I can think of a few that picked up some business though.
The PC business is still growing albeit at a decreasing rate, so there is no reason to expect that HP exiting the PC business will be the death of the PC as we know it. We find new uses for the PC every day and there are more people being added to the population every day. For now that means more people will buy PC’s next year than did this year. So I wouldn’t toss my PC or sell my Microsoft shares just yet.
Will some PCs be replaced by mobile devices like smart phones or tablets? I am sure there will be a few. Personally I just seem to be adding to my collection. In the 80’s I got my first desktop (IBM PC 14″ CRT), during the 90’s I upgraded my desktop (Dell PC 17″ CRT) and a bought a laptop (Sony Vaio). In the early part of this century, I upgraded my PC (HP Quad Core Dual 24″ LCD) and Laptop (HP TouchSmart) and added a windows smart phone. Is this sounding familiar to anyone yet?
In 2011 I upgraded my windows phone to an iPhone and added an iPad tablet to the mix. I can see all four devices right here on my desk as I write this. I wonder what the fifth gadget on my desk will be?
Very soon I expect to find a laptop with the video power I want to drive the dual HD screens I have connected to the current HP Quad Core hotrod. It might take one more desktop before the laptops can really become a truly dockable desktop for power-hungry-speed freaks on caffeine-without patience, like me. When that happens I will be able to eliminate a device and that will be cool. Maybe the Motorola Atrix will get there someday. I will admit, that is how my wife uses hers, she has eliminated the desktop PC from her office and just docks her HP TouchSmart.
So now that we know the businesses of Beach Street will survive, what about HP? Should you buy, sell or hold?
That answer is personal to each of us and what we believe. IBM survived quite nicely after getting rid of the PC business they invented. IBM did so because the CEO was a leader that had a direction for the company to go. HP CEO Leo Apotheker has been transforming the Silicon Valley icon for some time. HP’s consulting business has been growing for years. It wasn’t like Mr. Apotheker walked in and said “Hey guys, I was thinking last night and I don’t want to be in the PC business anymore.” The question for investors is simple. Is Mr. Apotheker creating a me-too IBM and will it work, or does he have another strategy that can carry HP into the next decade?
Leadership means knowing when an opportunity no longer supports the strategy and direction of the mission. In the case of IBM several years ago, it looked like PCs were no longer the opportunity that supported the IBM mission and the PC business was sent packing. Since leaving the PC business, IBM stock is up nearly 100% while HP is down nearly a third over the last 5 years.
IBM has a pretty clear mission, you can read it right on the investor relations page of their website. HP on the other hand doesn’t have a posted mission statement. I could only find this on a recent earnings report:
Hewlett-Packard Company — a leading global provider of computing and imaging solutions and services — is focused on making technology and its benefits accessible to individuals and businesses through simple appliances, useful e-services and an Internet infrastructure that’s always on.
That looks like a lot of the mission depends of consumer devices to me. Since I bet on leadership first, companies second, I call this a hold bordering on sell. Mr. Apotheker – Your thoughts please….
