HP’s announcement that is buying EDS has been received poorly by the markets. HP’s stock is off 6% while IBM, the company who should be hurt by such a deal, has seen its stock rise. Many of the issues people have raised relate to the poor cultural fit plus the relatively poor margins and growth EDS has been generating in recent years. HP in return is arguing that EDS creates a platform for them to grow large parts of their existing business – an argument the market clearly isn’t buying. To me this deal says more about Mark Hurd than it does about anything else. It is hard to argue that he has done a poor job since taking over the helm at HP. The business is stronger by almost every measure. I think he sees EDS as a business he can work similar magic on. I’m pretty sure he sees opportunities to improve the margins as he has at HP and get growth by selling in to his installed HP base. In other words, having done a pretty good job of turning HP around, he now needs something new to challenge him and his team. EDS could well prove a very smart deal. His board has to hope that while he focuses on EDS, someone else is paying equal attention to HP, because you can be certain that the likes of IBM and Sun will see this as a great chance to go after HP’s customers.
It seems HP may finally have a handle on its pretexting crisis. A quick search on Google News shows there have only been twenty six news items in the last week. Given the pace that news was pouring out a few weeks ago (nine an hour) this is quite a change. It is worth noting that there hasn’t been another big tech story of similar importance, so one can only assume that either HP has managed to put a lid on things or the media (and public) has simply moved on.
Two weeks ago I posted a piece on this corporate drama and of course today has been another eventful day what with the resignation of their General Counsel. Anyway when I wrote my last piece a Google News search on ‘HP and pretexting’ brought up around 4000 news hits. Two weeks later that number has jumped to just over 7000. That’s an average of over 200 new stories a day or roughly 9 new stories per hour. HP will be relieved to know it still lags well behind the Iraq War which is generating 100s of posts an hour on a good (bad) day.
Like many PR people I’ve been wondering why the crisis gurus have not been able to get the HP board under control. Surely the board doesn’t want the entire saga to be played out in the media? Right now though, every move of this mess seems to be getting air time in one media outlet or another (Google news has about 4000 news stories on the topic already). Having said that this seems to have been a recurring issue for HP – remember the whole Walter Hewlett saga?
Going back to the current problems, if the media circus continues and it shows no sign of stopping yet, then the very man that appears to have turned the business around (Mark Hurd) could be the one to pay the biggest price. Patricia Dunn meanwhile could end up with a cozy non-executive seat (I’m curious as to why she’s being allowed to stay on btw).
I can’t blame HP’s internal team for this situation. Company boards are notoriously tough to deal with and will rarely take good counsel even when offered. That said, when matters escalate as they have here, they usually listen to some crisis management expert. For HP’s sake I only hope someone is able to take control soon or the blood on the carpet may start to get thicker.
So Carly has gone and HP has a bunch of questions to answer. Will it truly remain one company or will it get carved up in ways that will excite the investment bankers and in the short term Wall Street? Will there be any, albeit subtle shift in strategy as people internally try and position themselves for whomever will become the new head of the business or businesses?
Forbes have published like crazy on this news today as have many other business publications. CNBC even had a special always on HP ticker. Interestingly I overheard lots of chatter on this in a coffee shop in HP’s home town, Palo Alto today. Most were shocked by the news. The general feeling seemed to be that Carly had got through the truly tough period. And while HP’s stock has hardly performed well under her leadership, neither it seems have any of the other major tech stocks during the same period. In other words, they can’t say she’s managed Wall Street any worse than anyone else has. If anything the chattering masses of Palo Alto were more concerned about how rudderless this news might make the company while the search for a new CEO went on. One guy put it well when he said: “if you were a big corporate customer weighing a deal between HP and IBM right now, you’d be a fool to go with HP. You have no idea what business they’ll be in in six months.”
So confusion is going to reign for some time as I gather the board’s decision was only reached late yesterday. This has left HP with a stand-in CEO. I’m sure HP will perform its day to day duties just fine but customers, especially big ones, care about the future of a business and with a stand in at the helm, that is going to make a lot of people nervous for some time to come.