Wednesday’s WSJ headline read: “What’s Gone Wrong With H-P”? Well first the backstory from the article:
- 9 months to July 2012 $5.8Bn loss – compared with 9 months to July 2007 when they made $5.1Bn profit
- Same period sales declined 5%. In 2007 sales were growing at 13%
- PE ratio now 5.5. At the end of 2007, 25.
- Recent Case Study by Kimberly Elsbach, professor at University of California states: “There’s an anxiety that permeates the workforce that has a chronic impact on people.”
- Four CEOs have run H-P since 2005.
- Overpaying for acquisitions – wrote off $8Bn of the $13Bn EDS deal and within a year of the Palm $1.2Bn acquisition closed it down. Last year H-P spent $10Bn on software group Autonomy. 66% of that price or $6.6 billion was goodwill or the premium they paid over the balance sheet assets. H-P had spent so much on Goodwill on of all their deals that it exceeds the value of the whole of HP.
- R&D spending has dropped
- Sales expenses continue to climb as sales drop.
- As Martin Reynolds, an analyst at Gartner puts it, “while H-P has some compelling products, the company is unable to communicate the value of H-P.”
- Current CEO Meg Whitman states that there are no silver bullets and that H-P won’t achieve meaningful growth until at least 2015.
Wake Up Questions
- Do I have a focused plan to monopolize my special niche of the market with products that really connect with the customer?
- Am I relying on legacy products to keep me ahead of the competition?
- Am I zooming out to look at my industry and how to change it or am I spending way too much time zooming in inside the weeds?
- Are my staff engaged in the cause, or are they punch drunk from the struggle to get through each week?
- Am I translating my company’s core value propositions right down to a compelling story at individual product or service levels?
- Is my balance sheet compatible with the 5 year road ahead? Is it fit for purpose?
- Do I have alignment between my costs, my sales and my long term goals?
- Am I really just trying to grow my business instead of scaling it for long term sustainability?
- Is it time to jettison those non core activities that never generate a decent return and that you aren’t very good at?
- Working on your business instead of in your business is the duty of a CEO. Your staff deserve it.