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3 steps HP should take to turn itself around

Rob Enderle | Dec. 3, 2012
Hewlett-Packard has problems that need fixing, and they go deeper than Autonomy.'s Rob Enderle says HP can learn from Chrysler, IBM and Apple -- each of which took the time to repair its image while deciding which parts of the business were worth saving.

Triage: Get HP Out of PCs and Personal Printers

Of HP's four industries, two show upside potential against the company's existing resource base. The first, as noted, is industrial printing for coverings. The market is nascent, and HP's scale could allow it, with focus, to dominate. However, doing so would result in eliminating most of the company, which suggests that a better path might be to sell off the industrial printing business and use the money to strengthen the rest of HP.

Enterprise computing, the second industry, would capture much of what HP is right now. Here, IBM represents what a focused, well-run company in this segment could accomplish. HP offers technologies in networking, storage, servers and even software that give it potential competitive advantage, but the company suffers from past decisions about software and services that need substantial work and focus.

Fixing this component of HP is in line with turning around IBM, but HP is in better shape now than IBM was when its turnaround started. Based on HP's existing makeup, it makes the most sense to make this business the core of the new HP.

The other two businesses are either in decline or under-executing badly. The personal and business printer market is in decline, while the supply side is under attack by cheap third-party suppliers. HP's consumer electronics business is under-executing in the market, as the growth companies that own it are far closer to pure plays.

Lenovo, one of the fastest-growing consumer electronics companies, resulted from the spin-off of IBM's PC division, and both IBM and Lenovo are more successful as separate entities. On the other hand, Sony, another combined company in the segment, is also underperforming. This suggests that consumer electronics firms need a tight focus-which, for HP, would mean a spin-off.

Prioritize and Execute: Image Is Everything

First and foremost, HP has a problem with image. So much negative news surrounds the company that investor, employee and customer concerns all reduce the firm's ability to execute.

Both Steve Jobs and Louis Gerstner, IBM's turnaround CEO, focused on image early on in their tenures. Both succeeded because this focus on image gave them the time to survive what is a five- to seven-year process. Since this buys time, getting HP's image to a point where people trust the brand again has the highest priority.

Analysis: DreamWorks, HP Ring in Era of 'Super Customer'

Next, HP should package the parts of the company that are no longer core to the "new HP" and sell or spin them out to investors. This improves HP's balance sheet, removes much of the complexity of the problem from the remaining executive staff and leaves the new firm focused on a single industry with the resources it needs to successfully compete.


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