Wednesday, November 09, 2011

Time for Hewlett Packard to (wo)man Up on the WebOS Deal

After moving over from a board member position to take on the CEO role on September 22, Meg Whitman and Hewlett Packard moved relatively quickly on deciding what to do about their $40 billion plus PC/laptop division. They hedged their bets and decided to keep it around for a while. Must have been a difficult choice! Admittedly, margins are slipping in this business.

The next burning issue on the plate is what to do with Palm and WebOS. This acquisition took place in spring 2012 to the tune of about $1.2 billion. Then in the intervening months, Hewlett Packard, introduced a tablet, decided to get rid of the tablet and have a fire sale, and then decided to keep the tablet around for a while with an OS from Microsoft. So much for my decision to use these tablets as coasters.

For the time being, Whitman and Hewlett Packard have decided to do “nothing” about WebOS. Do nothing is always easier and much more reversible than sell. It doesn't rank high on the daring scale, though. A couple of potential suitors, including Oracle(?) have been mentioned.

It probably makes no sense to have two tablets running on two different OS’s. That’ll confuse the public and the investor marketplace. Assuming HP’s fiscal year is the same as the calendar year, they have less than two months to sell the company (if that’s their decision) and let it hit the 2011 books.

Great article on “Behind the Woes at H.P., Wall St. Banks Lurk”.
http://dealbook.nytimes.com/2011/11/07/as-h-p-shops-its-bankers-do-very-nicely/

According to the article, it turns out that Hewlett Packard has paid out about $81 million in fees to investment bankers related to the acquisitions they have made over the last two years.

That’s how much Hewlett-Packard is estimated to have paid out in fees to its investment bankers in the last two years for advising it on a series of acquisitions including ArcSight and 3Par (premium of 242%!). According to the article, Hewlett-Packard’s market value has fallen by more than $40 billion during this period of time.

With respect to the decision to keep the PC division, “The costs and the risks of separation are simply greater than any value we could create,” Ms. Whitman said by way of explanation.

Meanwhile, the shareholders are losing out. One redeeming thing about the above; Whitman is taking a base salary of $1 for the upcoming year. Any further pay will be in bonuses and stock appreciation.

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