So the answer lies in the cloud. I think we probably knew that already, but it behoved ‘new’ HP CEO, Leo Apotheker, to make the point at his maiden strategy speech, in which he committed HP “to build a full cloud stack and help transition customers to hybrid cloud environments”.
Apotheker laid out “a four-point strategy … focused on three strategic areas” (don’t ask) to “expand market leadership”. I think that means ‘grow the business’. This includes buying more software companies, one assumes to try to get closer to IBM’s business mix. Last year, IBM generated 23% of its $96b revenues, and 44% of its pre-tax income from software. HP managed 3% of its $126b revenues and 5% of its operating profit. Indeed, IBM services head, Mike Daniels, threw down the gauntlet to HP (see yesterday’s FT), contending that IBM was “years ahead” in building an integrated software and services business.
There was other stuff in Apotheker’s speech, but it was frankly more aspirational than inspirational. And we could see little on how he intends to get all the moving parts – current and future – to mesh rather than grate. Unlike IBM, HP still carries both a PC and a printer business, which attract far more attention from investors than its software and services activities (just take a butcher’s at almost any concall transcript and you’ll see what I mean). And don't forget, services generate more profit for HP than any other division! Just last week, HP publicly dismissed speculation it was to sell off the PC business. “HP runs the world's largest PC business and it is core to HP’s strategy for the connected world”. Hmmm – IBM doesn’t seem to think so.
So long as management is held in thrall to key investors – and this is what life as a quoted company is always all about – Apotheker will find it hard to pull them ‘back to the script’. Even then, whether the juggernaut that is HP can really dance in the cloud, well that’s a different question entirely.