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Thursday, April 12, 2012

Analyst comment on some of IBM's competitors particularly HP

HP should stand for 'Help, Please!'
By Paul R. La Monica March 21, 2012:

HP has missed out on an explosive rally for tech stocks this year. Click chart for more on the markets.
NEW YORK (CNNMoney) -- HP stands for Hewlett-Packard. Shareholders can be forgiven if they thought it stood for "Help, Please!"

The tech company announced Wednesday morning that it is merging its PC and printer businesses. Word of the restructuring first surfaced Tuesday afternoon.

While combining HP's two most consumer-facing divisions may eventually turn out to be a step in the right direction, investors aren't buying it. Shares of HP (HPQ, Fortune 500) fell more than 2% Wednesday.
That continues a disturbing trend.

HP is down nearly 9% so far in 2012, making it the biggest loser in the Dow. The poor performance is even more jarring when you consider that it's not too hard to be going up in a market this robust.
The S&P 500 is up nearly 12% year-to-date. Only 18% of the companies in that blue chip index have lost ground in 2012.

Making matters worse is that all of HP's rivals and partners are taking part in this year's big rally.

9 top tech companies. (HP didn't make the list.)
And you probably don't need to be reminded about the stock performance of Apple.

It seems safe to say that the honeymoon period is over for new HP CEO Meg Whitman. The former eBay  chief and California gubernatorial (possibly the most fun word in the English language to say) candidate clearly has her work cut out for her.

Shaw Wu, an analyst for Sterne Agee in San Francisco, said that HP, despite some restructuring in the Hurd era, still needs to simplify its organizational structure. This could be a good start.
"Meg Whitman is looking to streamline costs, and that makes sense," Wu said. "It needs to be restructured and more efficient."

However, Wu said he wasn't sure what merging the PC and printer units will do to help HP, besides possibly saving on overhead. From a pure business standpoint, the move is a head-scratcher.
"These businesses may sell to the same customers, but they are very different. Printers last a lot longer than PCs, so the product upgrade cycle are very different," Wu said.

Also, the PC division really just sells devices, while the printing business tends to make more money not from the printers themselves, but through ancillary products like toner and ink cartridges.
HP backtracked on its plan to spin-off the PC unit once Whitman took over from Leo Apotheker, the former SAP executive who had a disastrous (and brief) stint at HP after Hurd left following a bizarre expense report mishap.

Now that HP committed again to computers, it is going to have to get back into the tablet game. Remember that HP bought Palm while Hurd was around, only to have Apotheker kill the company's TouchPad line of tablets after only a few months on the market.

Abhey Lamba, an analyst with Mizuho Securities USA In New York, said the mistake HP made was trying to sell devices running on Palm's WebOS when it was clear that it could not be a viable alternative to Apple's iOS and Google's. Now HP has to hitch its wagon to Microsoft and hope for the best. Microsoft's tablet-friendly Windows 8 operating system is due out later this year, and early reviews are very favorable.
"Clearly HP needs a tablet strategy, and I think HP understands that. But they have to do something tied to Windows 8," Lamba said.

There is no guarantee that Microsoft can make a dent in mobile. That's why Lamba is advising investors to stay on the sidelines for now.

Whitman is one of several tech execs with a $1 salary

Simply put, Whitman hasn't yet done enough to convince investors that HP has a viable long-term strategy.
"As a long-time tech investor, I am not tempted to buy HP stock now," said Michael Pytosh, senior portfolio manager with the ING Growth and Income Fund in New York. His fund owns Apple, Google and Microsoft shares.

"HP is reacting to the fact that dollars in tech are moving away from PCs to tablets and phones. It's not like they are innovating," he added.

Wu has a buy on the stock, mainly because it is insanely cheap. Shares trade at just 6 times fiscal 2012 earnings estimates. But even he concedes that HP has a lot to prove to a very skeptical Wall Street.
"HP needs change. Some people may want it to be more like Apple. But it really needs to be more like IBM," he said.

While IBM presciently exited the PC business in 2005 by selling that unit to China's Lenovo, HP is stubbornly sticking with it. Big Blue has thrived, despite a lack of a consumer business (no tablets or smartphones here!) because it has mastered the art of cross-selling the three S's -- software, servers and services -- that the IT departments of big businesses around the world need.

But as long as HP is still dragged down by low-margin hardware, it will continue to remain Little Blue or IBM Lite.

All great points. I talked about why Oracle's results are a good sign for tech in today's Buzz video.
VMware is up today too. But Hurd clearly needs to do more to help get the hardware business Oracle inherited in the Sun Microsystems deal on more solid footing.

And it is amazing to see how quickly Oracle has latched on to the cloud. Given the deals for RightNow and Taleo it's tempting to think that you are in a weird dream where Larry Ellison has morphed into former Oracle sales exec Marc Benioff and is now running

The_Real_Fly: Oracle has the cockiest management in the world, full of hubris.
Management or manager? Ellison is not lacking an ego. But that may not be a bad thing. He clearly has been a master (so far) at pulling off one acquisition after another to keep earnings growing.

And even though there has been a revolving door of heirs apparent during the past decade, Ellison now has two extremely capable lieutenants in Hurd and Safra Catz to soothe investors and customers when he has one of his frequent "Larry being Larry" moments.

The Motley Fool - The Worst Stock on the Dow
The Worst Stock on the Dow
By Andrew Tonner

March 30, 2012

The Dow Jones Industrial Average is full of iconic companies, some of the most recognized and admired companies in the world ... and Hewlett-Packard. What once was a widely respected and innovative company today finds itself lost and rudderless, unable to adapt to a rapidly changing world.

Dysfunctional board? Check.
Management with no clear turnaround plan? Absolutely.
Declining financial performance? That, too.

In almost every way, HP currently disappoints investors. It does hold the crown as the world's No. 1 personal computer manufacturer, and industry observers expect the PC market to grow 4% this year, implying expected shipments in the ballpark of 368 million -- no small potatoes. But in a world where PC-making is becoming an increasingly low-margin business, being No. 1 means very little.

The real problem with HP, and many of the old-line PC makers, including Dell, is that they have no credible plan to address the direction the future is heading in, and that's a problem that should have investors shaking in their boots. HP's attempts to move into new markets have been almost laughably inept. In 2010, the company spent $1.2 billion to acquire smartphone maker Palm, touting that its webOS mobile software would allow it to compete in this growth area. It didn't work out that way, and late last year, new CEO Meg Whitman announced that the company would make webOS open-source, in a strong signal of defeat.
On the tablet front, the TouchPad product that came to market was an epic flop as well. Although there was some fanfare surrounding the release, the enthusiasm was short-lived. Problem was, the TouchPad lacked the software chops needed to give users the compelling experience they can find elsewhere. Instead, the company decided to try to entice consumers by including hardware specs like Corning's Gorilla Glass. And while Gorilla Glass has certainly seen some success in the tablet space, it doesn't move the needle quite as much as credible software. In no time, retailers were slashing prices left and right to simply move the idle inventory.

Note the $300 discount. Again, far from a smashing success.And worst of all, other companies are busy making major inroads into these massive growth markets while HP still has yet to announce any kind of achievable action to right the ship. Apple's success in this area has been well documented, setting records by selling 15.4 million iPad 2s last quarter and following that up by selling 3 million of its new iPad in its first weekend alone. priced its Kindle Fire tablet at an aggressive price to gain share in the tablet space as well. By the end of last year, it had sold 5.5 million units, and it could already be manufacturing its next iteration of the Fire.

I'm not saying HP's dead in the water. The company is aware that it needs to address its issues, and soon. My question is simply, how? And that's a big part of why the company's stock is down 42.3% over the past year.

Investor Place - HP Dividend Hike Not Enough to Make This Dud a Buy
HP Dividend Hike Not Enough to Make This Dud a Buy
Shareholders rewarded while Whitman works on results

by Marc Bastow | March 28, 2012

It really must be head-spinning time out at Hewlett-Packard). And by head-spinning, I mean the Regan in “The Exorcist” kind.

The last few years have been baffling to say the least at HP.  These has been a spate of high-priced buyouts that have come to nothing, including the $1.2 billion acquisition of Palm. There has been yet another change at the top of the HP pyramid with the appointment of Meg Whitman to the top post, the ninth change in the CEO chair since 1999. And most recently investors learned of plans to combine the printers and PC business at Hewlett-Packard.

The latest? Just last Friday Hewlett-Packard authorized a modest 10% hike in the company’s quarterly dividend, while also promising to increase the dividend annually by double digits. That will give the company a respectable yield of around 2.1%.

Don’t be fooled by the payout promises though. The real story of what HP is going through can be easily summed up in three simple points:
1.    HPQ stock has lost nearly $35 billion in market value in the past year, and is desperate to show value for shareholders holding on for the long haul;
2.    Recent structural changes to the company’s business lines will eventually wring out enough in cost savings to find economies of scale, but that’s the best plan to ”grow” the business;
3.    Nobody in the Wall Street trenches will notice the dividend or any real changes at HP.
In short, Hewlett Packard is at best a company slightly out of control, and at worst a company completely out of touch.

This is not to say the dividend is a bad move. On a purely cash basis, the move will have little effect either short or long term on their overall ability to pay the dividend: HP generated nearly $11 billion in cash flow in fiscal year 2011, more than enough for a payout slightly in excess of $1 billion annually. HP also maintains a healthy if not Apple-like war chest of $8 billion in cash.

From a basic dividend investor perspective, HP’s 2.1% dividend yield is fairly attractive. But sustainability and the yield are not quite the issue.

The recent combining of HP’s Personal Systems Group (PSG) and the HP Imaging and Printing Group (IPG) is viewed in many quarters as nothing more than an opportunity to find ways of cutting costs (read: jobs) across two struggling business units.

Both groups operate in brutally competitive markets where market share, revenues, and profits are at a premium. PSG is under siege by competitors like Lenovo and Dell, while the printing business margins continue to erode. The merge may do little to turn around either division, and do nothing to help those who will be eased out.

Whitman acknowledged during the Annual Shareholder meeting last week that the company faces “real challenges” ahead, and this one just might be the tip of the iceberg.

It’s difficult squaring up rewarding shareholders with the promise of continued increases in their dividends, as employees are forced out from yet another CEO trying yet another restructuring (see also: Leo Apotheker).
So either HP’s management is too out to lunch to recognize the image problems with such moves, or they are simply too tone-deaf to care.

There are obviously changes that need to be made. But HP management has their work cut out for them as they find a way to get through yet another possible lapse in perception.
And remember, sometimes perception is just reality.
Marc Bastow is long in AAPL.
Investors take wait-and-see attitude on HP turnaround plans
"HP will be the gift that keeps on giving -- both to its competitors and to short sellers everywhere," said Jim Cramer in msnMoney, adding in, "To say that Hewlett-Packard has lost its way is an understatement" ... Sterne Agee analyst Shaw Wu said in MarketWatch, “It seems investors don’t have a lot of confidence in the company’s ability to turn around.”

msn Money - Hewlett-Packard takes a step closer to irrelevancy
Hewlett-Packard takes a step closer to irrelevancy
Changing technology trends that favor the PC maker's competitors only add to its woes.

By Jim Cramer
March 12, 2012

Wherever I go, whatever story I read, Hewlett-Packard always seems to be on the short end of the stick. I recently looked at IBM, Accenture and SAP, all of which are doing so well, and I have to conclude that they are simply carving up Hewlett-Packard's consulting business.

Then there is the $10 billion acquisition of Autonomy to boost the enterprise consulting business by offering search software. Having seen SAP's search software in action, I have no idea how Autonomy can compete. Must have some clients, I guess, but SAP is gunning for what HP has left.

We all know Hewlett-Packard raised the white flag when it came to tablets last year, an incredible about-face on a product that it thought was integral to its strategy. We also know HP tried to develop phone infrastructure with the purchase of Palm, something Mark Hurd said wasn't about trying to build a phone operation and then reversed himself a few weeks later. That seems like a common theme in that culture.
Finally, there are personal computers. Last year Apple surpassed HP in personal computer sales pretty much out of nowhere, as it had always been HP vs. Dell.

But what's not included in the equation is the iPad. The new iPad HD seems like a suitable opponent to the personal computer, but that wasn't the case with the iPad 1, and the iPad 2 seemed only incrementally better than the personal computer. Now I can't think what the laptop, a big HP seller, has over the iPad. Maybe some software companies and data companies don't support the Apple world? Otherwise, someone please tell me why, if you were an enterprise buyer, you would stick with HP other than some bogus worry about security or because of entrenchment and good service.

 The most important point against HP is that the information technology world is gravitating toward the companies that have mobile, social and cloud. While Autonomy was supposed to be helping HP in the cloud, the company has no mobile or social strategy whatsoever.

Hewlett-Packard has been starved for innovation as even new CEO Meg Whitman said last week. And the only thing I see dominant in the whole franchise is the printing business. But believe me, given the way HP forces people into different models and has so many different cartridge types, any client would be glad to migrate from the HP printer arrogance.

None of this would matter if HP were a small company. But it's just the opposite. It has $130 billion worth of revenue that can be taken from others, and I think that's exactly what is going to happen, especially when you factor in that a scorned Mark Hurd from HP can certainly be cherry-picking vulnerable clients who want to migrate from HP hardware and software to Oracle's software and Sun Micro's solution. Not to mention EMC's and Dell's competition.

HP is still profitable. It still has lots of an installed base, and it sells a lot of bundled solutions.
But to me, the questions are how fast those revenues will go down while the company trims its staff and how it can possibly recover from the lapses in spending and research while others forge ahead.
To me, HP is going to be a source of funds as a stock and a source of clients for years and years. It will be the gift that keeps on giving both to its competitors and to short sellers everywhere.

The Street - Jim Cramer on HP
Jim Cramer on HP

By Jim Cramer
To say that Hewlett-Packard has lost its way is an understatement, said Jim Cramer. As other competitors grow, the $120 billion company is falling behind in the hardware and consulting space, lacking significant mobile, social and cloud strategies.

"You have a company that's kind of been left out and I don't where the turns going to come from. It's not going to come from just printers," Cramer said.

HP continues to lose out to competitors in the hardware space. Apple passed Hewlett Packard as the largest hardware seller, and Cramer said the tablet has turned out to be a category that's more important than ultra-book. Though HP spent a billion on Palm, for its operating system, it has not lead to a phone. In addition, Cramer thinks the public has soured on HP's printers.

HP, he said, had been making some inroads on the consulting side but he thinks that could be rolled back.
Despite the recent rally in the stock market, HP has continued to drift down and Cramer thinks the company is in serious trouble. Though HP's bonds are holding up, he wouldn't want to hold them either. He prefers Accenture, IBM, and SAP, which stand to benefit as they pick off pieces of the business.

"This is tech. This is not General Mills. It's not Kellogg. Get a new CEO in there and they are not going to be able to reinvent the syrup. Hewlett Packard is falling behind. And the others are spending a lot more," Cramer said. "Here, I think of SAP, Accenture. To a lesser extent Dell. And certainly IBM on the consulting side."

HP, unloved and under appreciated?
March 19, 2012, 2:31 PM

It’s been a pretty good year, so far, for the giants of the technology industry.
Well, except for Hewlett-Packard. As the first quarter of 2012 draws to a close, the big tech names on the Dow Jones Industrial Average have posted double digit gains.

Intel Corp. is up by 14%, IBM Corp and Cisco Systems by 12%, and Microsoft Corp. by an impressive 24%. But then there’s H-P. The Silicon Valley icon’s stock is off by 5%, one of the top decliners on the Dow.

So what’s going on?
Sterne Agee’s Shaw Wu says he’s been talking to investors and he says, “It seems investors don’t have a lot of confidence in the company’s ability to turn around.”

“Some of the concern is with management but also with the end markets the company participates in, namely printers and PCs,” he adds. “There is also concern with the balance sheet and whether they can improve it.” There’s been a lot of uncertainty surrounding the PC market, in the wake of weak consumer demand and the lingering impact of the hard disk drive shortage following the Thai flooding disaster.

Last week, Jefferies analyst Peter Misek cut his estimates for H-P and for Dell Inc. citing multiple headwinds for the PC industry.

In fact, he argued, “We believe PC-related companies that are citing Thai-flood HDD issues as the cause of PC weakness have been using it as a smoke screen to mask underlying slower demand trends. Due to these factors, we expect PC sales, especially notebook sales, to slow meaningfully.”

H-P’s printing business, once seen as the crown jewel of the Palo Alto, Calif.-based giant, is also facing a market that many believe is in secular decline. The reason: users apparently are losing interest in printing pictures and documents.

Still, Wu of Sterne Agee was upbeat about H-P’s stock which, he said, reminds him of “Cisco and Dell a year ago.” He was referring to the two other tech giants staged a comeback after reeling from poor reviews on Wall Street. Dell shares have gained 19% this year.

Wu has a buy rating on H-P, arguing in a recent note that the stock “is an underappreciated turnaround story.”- Benjamin Pimentel

Whitman's dilemma: It may be easier to identify challenges than fix them
HP CEO Meg Whitman may find it easier to identify the company's challenges than to solve them, The Financial Times reported... After HP announced it is combining imaging & printing with PCs, Forbes said the best option for HP leadership is to learn from its mistakes and return to its heritage of innovation, but the reorganization amounted to rearranging the "deck chairs on the Titanic" ... After defending her strategy before HP shareholders, and making the case why HP is still relevant, reported Whitman received mixed reaction.

HP chief finds pitfalls easier to identify than fix
By Richard Waters

March 7, 2012

The loud hissing sound that can be heard in the heart of Silicon Valley is air leaking out of Hewlett-Packard’s share price. With its frequent leadership changes and boardroom spying scandal, HP had already guaranteed itself a place among business school case studies. Now, in the face of a broad based erosion in its competitive position, it has become a cautionary tale that highlights the pitfalls that can befall tech conglomerates.

Having slumped 6 per cent after it published weak quarterly results two weeks ago, HP’s shares have been on a steady slide that took the decline to 16 per cent before a halfhearted bounce early on Wednesday. Wall Street has clearly decided that for a company that was already reeling from a series of missteps, things can get even worse.

The messages from this are of wider significance for the tech world. First and foremost is the need to recognize, and adhere to, a clear distinction between value and growth strategies. The transition from growth stock to value play has always bedevilled tech concerns. HP’s mistake, though, was its failure to decide which side of the line it wanted to stand.

Until Mark Hurd was unseated as chief executive after losing the confidence of his board some 18 months ago, HP was well on the way to becoming a value story. The profit margins in the world’s largest PC business by sales, for instance, are never going to be very exciting, but Mr Hurd managed to drag them up to a point where they were at least respectable. This was a welcome change from the previous regime, when HP executives seemed undecided about whether they should be chasing growth or margins. His reward was a jump in HP shares as a new class of value investor climbed on board.

Imagine the surprise of those same investors then, when Léo Apotheker, who stepped in after Mr Hurd, executed a 180 degree pirouette and declared that HP was back on the path to being a growth company. Publicly trashing the PC business even before he confirmed plans to dump it while at the same time drastically overpaying in a $10bn deal for Autonomy were guaranteed to make the value crowd on Wall Street see red.

In the circumstances, new chief executive Meg Whitman has done the smart thing. A quick about-turn that keeps PCs within HP may or not be the right long-term decision, but it should at least stem some of the value-destruction in the short term.

But while HP is still big in personal computers, it has lost touch with the main trend in personal computing: the rise of touchscreen devices. Ms Whitman is now entirely dependent on Microsoft’s ability to make the forthcoming Windows 8 the killer platform that is finally capable of competing with Apple and Google on mobile devices. Like Nokia, which has thrown its lot in with Microsoft’s lagging Windows Phone software, this is not a comfortable place to be.

A second frequent trap for tech companies, and one into which HP jumped with both feet, has been trying to serve both consumer and business markets. Few have been able to do both well at the same time: the 23 per cent drop in consumer revenues at HP in the latest quarter, at a time when Apple’s business soared by 75 per cent, shows how far behind HP is falling. Apple is riding the wave of “consumerisation” of business IT without compromising its single-minded focus on users.

Third in the list of pitfalls is the danger of a mistaken “transformative” acquisition. Wary that the challenge of integrating large businesses might distract them from fast-moving new markets, tech companies have traditionally stayed clear of large deals – a mold that was broken partly by HP’s own acquisition of Compaq more than a decade ago. It is now becoming apparent that Mr Hurd’s purchase of EDS to boost his company’s presence in services has left it with a business far more in need of fixing than it realised.

The final pitfall is one that faces all conglomerates: allowing a reliable cash cow to distract from the difficult decisions that need to be made about other, less successful businesses. In HP’s case, that cash cow has been its imaging and printing division. This has been one of the great unsung tech success stories, but it is not without its challenges. Consumers now print fewer pictures at home, eating into sales of ink cartridges: the unit’s profit margin fell by more than a quarter in the latest period, to about 12 per cent.

Ms Whitman has not shrunk from blaming her predecessors, notably for failing to invest enough in new products over a sustained period, and has set about an urgent effort to shore up operations that are suddenly sagging on many fronts.

But identifying the sins of managements past is easier than fixing them. As HP’s shares continue to head south, the odds that it will eventually be forced into a more sweeping break-up have been rising.

Deck Chairs On The Titanic? Interpreting HP's Reorg
Roger Kay, Contributor 3/26/2012 @ 9:18AM

Our industry is hardly ever at a loss for excitement.  If it’s not one thing, it’s another.
Last week for the umpteenth time, Hewlett-Packard (HP) announced that it was reorganizing its divisions.
In this instance, it is blending the Personal Systems Group (PSG) with the Imaging and Printing Group (IPG).  This stuff is insider baseball, HP palace politics, but nonetheless, a whole slew of tea-leaf-readers follow and interpret these intrigues before, during, and after they unfold.

The mingling of the PSG and IPG assets is a redux, mirroring the same strategic maneuver executed by Carly Fiorina in 2005 for somewhat similar reasons, but with the opposite structure.  Then, briefly, Vyomesh Joshi (known as “VJ”), the now-former head of IPG, took over the whole ragbag for a few months.  Looking back, it was perhaps his grandest moment.  Former CEO Mark Hurd pulled the two divisions apart soon after he took over from Fiorina.

This time, however, under brandy new CEO Meg Whitman, VJ was shown the door, and Todd Bradley, long suffering head of PSG, got the nod to run the combined show.
Bradley will finally get his day in the sun.

And none too soon, either.  Bradley’s patience with HP has thinned over the past several years, as it passed over him for the top spot twice and even, under the short-lived regime of Leo Apotheker, considered dumping PSG entirely, labeling it a “commodity business,” a diss from which Bradley — not to mention the division itself — has barely recovered.

His sunshine will last for only a day, though.  Tough work lies ahead. HP held a not-particularly-illuminating call with industry analysts last Friday.  The company chose as spokesperson someone apparently not actually briefed on the subject.  Some of the analysts tried to ask probing questions, but made scant headway, as the spokesperson pleaded ignorance about many of the most pressing inquiries.

But the outlines of the reorganization are becoming clearer nonetheless.
IPG has long been a hearty contributor to HP’s top and bottom lines, and still is, but its margins have halved in recent quarters.  Revenue growth is stagnant with maybe a hint of decline.

PSG is the largest contributor of revenue to the company, but its margins are lower than IPG’s, an indicator, perhaps, of the fact that PSG has many competitors and that IPG stands nearly alone at the top of the printing-and-imaging pyramid.  Selling ink by the bucket is still a great business.

PSG’s revenues are off, and its margins, under pressure, but some of this performance could be attributed to Apotheker’s premature announcement of the division’s death, which was made before — and was certainly a major factor in — his own invitation to walk the corporate plank.

Despite their relative positions, PSG has a more obvious future than IPG.  HP has become known as one of the better makers of all-in-one desktops, those sleek concoctions that combine the computer “works” with the display into a monolithic unit.  Arguably, all-in-ones will account for a rising proportion of future desktops, since the “works” will continue to get smaller while the requirement for a display larger than is practical for a portable machine will remain for some users.

Meanwhile, Intel is reinvigorating the notebook category with its Ultrabook push, creating extremely thin, light designs that boot and resume quickly, deliver a high-performance experience, and offer all-day battery life.

Tablets — at the moment ceded to Apple, which got off the blocks before the rest of the racers had even bent over — will get a rejuvenating injection when Microsoft brings out Windows 8 later this year.
So, there is something to look forward to in PCs.  Not so much in printers.

I sat with VJ for 45 minutes at IPG headquarters in San Diego last October, at which time he articulated the division’s way forward.  He spoke of scanning and printing as on- and off-ramps in an otherwise electronic workflow, one which HP could help manage — even as it tried to convince people to get off once in a while to print something.

As I thought about his departure last week and that day I spent with him and his lieutenants, I looked around my office at the gifts I received during my visit.  One was a beautiful print of a 35mm slide that I had taken in the mountains of Northern Italy in 1986 and subsequently scanned with a Nikon CoolScan high-resolution scanner.  With Adobe’s PhotoShop, I took the 65MB TIFF file down to something more manageable, a 2MB jpg.  No detail of the gorgeous analog original was lost.

The print was done on paper textured to look like canvas, and the form was stiff and foldable so that after the print was made, it could be formed into a shallow box that looks a bit like a real framed painting.  One great gimmick is that the edges of the photo are replayed on the sides of the box so that one sees the photo from all angles, although details at the edge are repeated.  Still and all, the effect is lovely.

The other gift was a photo album.  At a kind of rest station on the factory/office floor where employees can go to do printing tasks for free, my guide took a handful of digital cam shots of my boy and a friend, which I happened to have on my notebook, printed out 4x6s and 5x7s, and, with an auto-compose tool, set them in a nice book, which I took home. The thing about these two charming items is that they represent corner cases in printing: high-value-add processes that one might do on occasion, but not every day.

Contrast that with what I used to find next to the (HP) printer when I worked at IDC in the mid-2000s: literally hundreds of abandoned Web pages and emails, printed by people who thought that they needed them and then forgot about them in the general insanity of the moment.  Clearly, those printouts weren’t as important as their originators thought when they hit the “print” button because they managed to get along without them.

Information has exploded.  Trees are rarer.  Printing doesn’t scale.  People save files or indices to places on the Web to find things nowadays. So, printing is in decline, retreating to specialized applications, and PCs have a way forward, albeit a difficult one.

What these two businesses share in common is that they are not on the strategic main boulevard of the company, which sees itself growing further as an enterprise solutions provider akin to IBM.  HP still has work to do building its software side, but its enterprise hardware and services are already world class.  The enterprise business has both growth and healthy margins, good reasons to focus investment on it.
What’s ahead for the combined IPG-PSG unit?  Clearly, cost cutting.  No headcount reduction number has been announced, but it is likely to be significant.

Otherwise, product-line simplification.  From Apple, other companies are learning the benefits of a simple product line.  HP has far too many products in both IPG and PSG, and each one comes with its own personnel and cost structure.

The benefits of simplification will be lower costs and better focus.  The drawback is that a lot of people will lose their jobs.
Analyst: HP's coal is just coal, no diamond in the rough
Hewlett-Packard is under-invested in R&D, lacks focus, and its business model is under pressure because HP relies too heavily on PCs, printers and ink sales, Deutsche Bank analyst Chris Whitmore said, Bloomberg Businessweek reported: "HP has gone three years without any meaningful cash flow growth. 'Either $40 billion went down the rabbit hole or [HP's] core business is under duress,' Whitmore said"...After The Motley Fool reported the printing business is worth 40% of HP's total enterprise value of $71 billion, Fortune said, "The slowdown in printer sales is hitting HP at a tough time. Whitman is trying to do more than rearrange HP's deck chairs, she's trying to make bold moves to eliminate the company's weaknesses and focus on its strengths."

Bloomberg Businessweek - How Exactly Does HP Invest in the Future?
By Ashlee Vance on March 23, 2012

Hewlett-Packard’s decision to merge its PC and printing businesses into a single entity does not stand out as a terribly novel idea. The company was for this structure (under Carly Fiorina) before it was against it (under Mark Hurd). And Hurd had contemplated merging the units near the end of his tenure to chase the same proposed gains from unifying the supply chain, branding, and support that Meg Whitman now hopes to realize.

What must keep Whitman awake at night are the far more daring moves that HP will need to take to reawaken its business. Chris Whitmore, an analyst at Deutsche Bank, issued a research note this week that framed HP’s competitive position in the starkest of terms.

Whitmore notes that HP spends less on research and development per year than IBM  or Cisco .
Keep in mind that HP is a larger company than any of those rivals, and competes in a wider range of businesses—PCs, printers, servers, storage, software, and networking. Oracle, by contrast, mostly deals in software, while Cisco concentrates on networking. If you take out the money HP spends on printer R&D, it runs about the same as a pair of companies that are even more specialized. Over the past six years, HP’s R&D spending as a percentage of revenue has gone down about 25 percent.

HP, a $130 billion-in-revenue-per-year, one-stop-shop technology colossus, has been investing in products as if it were doing battle in a niche market. Digest that for a minute. It’s a wonder HP has managed to get new products out the door at all.

True, HP does not need to spend as much as rivals in some respects. It relies on partners such as Intel  and Microsoft to do a little of the innovation heavy-lifting and then uses its reach to sell products. It has also used $40 billion in acquisitions over the past four years to plug gaps.

As Whitmore points out, though, that strategy does not seem to have worked. HP has gone three years without any meaningful cash flow growth. “Either $40 billion went down the rabbit hole or [HP's] core business is under duress,” Whitmore writes.

HP still does not seem to have a smartphone or tablet strategy, while the margins on PC sales remain tight. The company’s moneymaking printer division has started slipping and its services business has failed to meet expectations. (Making matters worse, Whitmore estimates that 75 percent of HP’s services deals are tied to PCs, printers, and high-end servers—all of which face tremendous pressure.) Having added all this up, Deutsche Bank slapped a $20 per-share value on HP, which closed at $23.03 on Thursday.
An HP spokesman declined to comment on the Deutsche Bank research note, and instead pointed to comments Whitman made recently during a call with investors.

“We didn’t make the investments we should have during the past few years to stay ahead of customer expectations and market trends,” Whitman said. “As a result, we see eroding revenue and profits today. We need to invest now as a market leader from a position of strength, and that’s especially true because these businesses are not only under intense competitive pressure but are also under pressure from tectonic shifts that are taking place at the very foundation of the industry.” So, yes, she is aware of the problems.

“We need to move quickly to capture emerging opportunities in areas like cloud, security, and information management,” Whitman continued. “We’ve already assembled some formidable assets. Now we need to align our portfolio to deliver a new generation of capabilities. We see a once-in-a-generation chance to define the future of technology and position HP as a leader for decades to come.” Right. There’s the call to arms.So, let’s assume for a moment that HP’s new leaders aren’t just rehashing the old ideas of old leaders. Whitman must have something far more drastic in store. Right?

The Motley Fool - Ink is Black Gold for HP
Ink is Black Gold for HP
Brendan Mathews
March 16, 2012

Hewlett-PackardHas fallen on hard times. A series of bad acquisitions, management turnover, a few bad quarters, and a dismal outlook for personal computers have resulted in a beaten down stock price -- less than 9x earnings. At today's prices, HP represents a solid value, driven in part by the value of HP's printing business. Printing is a cash cow, and according to my estimates, its milk accounts for 40% of the value of the company.

HP is No. 1 in the printing market with 42% market share, which is more than the next two competitors combined. HP uses a razor blade business model: printers are sold at low cost, encouraging frequent upgrades to a wide array of printers with non-standard ink cartridge or toner fittings. HP then generates a recurring stream of revenue from cartridge sales. The economics of HP's printing business are phenomenal. To put it in perspective, printer ink costs more than blood by volume and more than caviar by weight.
The high price of ink isn't an accident. HP creates thousands of printer and ink SKUs, which makes it nearly impossible for independent replacement-ink vendors to operate at a profitable scale compared to HP. Check out the number of HP printer SKUs refills offered at Staples -- and also notice that Staples doesn't even sell generic ink. HP's engineers purposely design cartridge holdings to be difficult to copy with "compatible" refills, even going so far as to manipulate the chemicals in the ink (i.e. if your generic refill doesn't have the right viscosity, it'll jam the printer). Consumer Reports has labeled generic refills as a false economy because they frequently don't work.

To maintain the ink-cash machine, HP spends $1 billion a year on ink research and development and holds 9,000 patents related to imaging and printing, 4,000 of them for consumable supplies such as ink and cartridges. "Typical ink development might have five PhD chemists working on it for several years and of course an army of technicians," says Nils Miller, an ink and media senior scientist for HP, "and that was just to develop it." HP will also sue to enforce patent rights.

Bears will point out that tablets from Apple  and Amazon  have reduced the need to print out documents. That may be partially true; however, in my humble opinion, we're still decades away from a paperless world, and professional researchers seem to agree with me. IDC predicts the market for printers and ink will hold steady for at least the next five years.

The printing business generates revenue of $25 billion annually at a 15% operating margin (before unallocated corporate overhead). By comparison, Lexmark generates 6.5% operating margins and trades at 8x earnings. After allocating corporate overhead and deducting taxes, my estimate of earnings power for the printing unit is $2.9 billion. A multiple of 10x, which is a reasonable premium to Lexmark, implies an enterprise value of $29 billion. In other words, the printing business alone is worth 40% of HP's total enterprise value of $71 billion.
CTO says HP wants to be primarily a hardware company
Hewlett-Packard chief technology officer Matt Potts raised eyebrows when he told TheStreet HP wants to be a hardware company that differentiates itself through integrated hardware, software, and services solutions for clients, which he claimed is different than IBM's strategy. The CTO said HP is not looking to be a software and services business "like IBM," adding, "We are primarily a hardware business, with software and services -- they are primarily a services company that has software, and has some hardware." Odd then how software was the one part of HP's business that grew last quarter.

Smarter Planet makes IBM a smarter investment
IBM's stock price has tripled since the Smarter Planet strategy was launched in November 2008, BloombergBusinessweek said: "It’s a rare feat for a company as large and as old as IBM to rewrite its image and reignite interest among once cool investors... IBM has an ethos that speaks to the future, while rivals such as Hewlett-Packard often seem like they’re doing the same old, same old" ... Bloomberg published a similar feature on the success of IBM's Smarter Planet  campaign.

Who's winning the cloud race?
Synergy Research Group predicted a "two-horse" race between IBM and HP in cloud computing, with Cisco in third, Datamation said... said though Cisco UCS is seeing some momentum, "service providers say the proprietary system isn’t a good fit for the cloud"; in fact, some cloud and hosting providers are moving off UCS... Bloomberg said Oracle is playing catch-up in cloud computing as companies swap older ERP systems for cloud-computing software: "Oracle was years late to market with its Fusion applications... Salesforce and Workday are causing customer defections and eroding Oracle's application maintenance business."

HP, IBM and Cisco Battle for Cloud Dominance
HP and IBM are fighting for the cloud infrastructure top spot while Cisco closes in with a little help from its UCS portfolio.
By Pedro Hernandez

March 27, 2012

HP is the cloud equipment king, but IBM and Cisco aren't far behind, according to a new report from Synergy Research Group.

As with any hot market, the research firm's "4Q11 Cloud Equipment Market Share" report paints a rosy, if volatile, picture of the cloud server, storage and networking equipment sales. In the last quarter, HP took home 17.4 percent of worldwide cloud hardware revenues. IBM was close behind with 15.9 percent.

All told, IT vendors booked $39.4 billion in cloud equipment revenues last year, a 15 percent increase over 2010. In the fourth quarter alone, they brought in a healthy $10.6 billion haul.

Those stratospheric figures are due to an explosion of Web-enabled services, says Jeremy Duke, Synergy Research Group's founder and chief analyst. "Cloud services are clearly a game changer in the market and we're seeing huge growth in interest, service launches, and customers," he said in a company statement.

"The vendors that provide infrastructure for cloud services have the opportunity to benefit greatly from this surge -- you don't see many $40 billion markets growing by 15% per year," he adds. The bulk of that growth is coming from Europe, the Middle East and Africa (EMEA) and Asia-Pacific. North America still accounts for the largest share, however, with 43 percent.

While the expanding cloud market is raining good fortune on IT vendors, some are faring better than others.

Cisco is the growth leader for 2011, having experienced 23 percent increase in cloud equipment revenue from 2010 to 2011. While its top dog status in networking is a given, Synergy Research observed that Cisco's blade server business is picking up steam.

Earlier this year, Cisco announced that it hit new milestones with its UCS portfolio, which integrates networking and server hardware. The company now has 10,000 customers running UCS servers and the product slate is responsible for $1.1 billion in annual revenues. Todd Brannon, a product marketing manager for Cisco, told that his company is currently selling more UCS B-series blades than rack-mount C-series systems.

In the North American market, Cisco's upward momentum places it near the top along with HP and IBM. The report also notes that HP grew its cloud hardware business by 10 percent in 2011 while IBM's growth chugged along at a mere 2 percent. The two companies were virtually tied for first place in 2010.
Sample Tweet: Service providers say Cisco UCS isn't the option for everyone


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