Wednesday, August 15, 2012

Major Moves by Hewlett Packard and CEO Meg Whitman

The sleeping giant is making some moves.  Last Wednesday,    ewHewlett Packard wrote down its investment in its enterprise services division by $8 billion.  To put this in perspective, Electronic Data Systems(EDS), which is part of this group, was purchased four years ago for $13 billion.  
The write-down is one of those accounting “things”.  Its recognition that the investment in EDS  was not as great an investment as HP originally thought it would be.  Some would say, “Oh, a major mistake.”  Others would say “market conditions.”  Regardless, it’s a hit to goodwill and an expense to the income statement.  It's  a non-cash adjustment to the balance sheet.  As a result of the charges, Hewlett-Packard said it would report a loss of $4.31 to $4.49 a share when it announces its third-quarter results on Aug. 22.

This week, an  interesting move by by HP CEO Meg Whitman.   The WebOS group is being spun off  as an independent but wholly owned subsidiary.  Its name, Gram.  The tagline - “Potent.  Light.  Nimble.  At the core of all things big and small.”  Gram will be in stealth mode for the next few months.  An open source version of WebOS will still take place in September.
My humble opinion is that the market will like the Gram news on Thursday.  It’s not a light move, name notwithstanding! This gives Gram the opportunity to innovate  more quickly than it would if were still in the HP corporate  framework. Not quite a skunk works.   Going against Gram is the fact they’ve lost brainpower over the last several months. Reactions by tablet makers?  They probably won’t make any grand statements.   

August 15 marked day 328 of Meg Whitman’s tenure as CEO.  The stock has dropped   15% since she took over as CEO, hitting a one-year low of $17.41 in early August.  Both the Dow and NASDAQ are up a little over 20% during that time.  Dell has dropped by about 12% over this period.

Whitman  has stated since the beginning of her tenure as CEO September 22  that the turnaround will take time.  These and the layoffs announced   in May are major moves.  She and HP are  not standing still. 


1 comment:

David Ing (coevolving) said...

Craig, thanks for the update on WebOS. I had early Palm devices, so I've generally been a fan of the technology. Technology isn't enough in a competitive marketplace, though.