Wednesday, January 7, 2015

Vendors Survival: Will HP Survive until 2025? - is not a question to be asked anymore

My Vendors Survival posts series included posts on Google, EMC, Facebook, Apple, Sun Micro Systems, Microsoft, Software AG. and other companies. 

Two posts were written about HP. The first post written in 2008, was titled: Vendors Survival: Will HP Survive until 2018? - HP's EDS acquisition First Take.
EDS was acquired by HP in order to become one of the two largest IT Services companies.  

My prediction was not optimistic: "Sorry, but the optimistic view seems to me less realistic than other scenarios".

After years of large layoffs, including many EDS's previously employed, no one could argue that I was wrong. 
The second post revisited my predictions on 2012. It was titled: Vendors Survival: Will HP Survive Until 2018? - Revisited.
It was mainly about large layoffs as indicator of failure. 

Since October, 2014 the question I asked is irrelevant. 
Now we should ask: Which HP, if any, will Survive Until 2025? 

HP was splitted to two companies: HP which keeps HP's logo and its business lines are PCs and Printers and the remaining units which will be called Hewlett-Packard Enterprise. 

According to HP's press release the goal is: "Strategic Step Provides Each New Company with the Focus, Financial Resources and Flexibility to Adapt Quickly to Market and Customers Dynamics While Generating Long Term Value to Shareholders".

Nobody would deny that Flexibility and Adaptability are a must in 2015. By splitting itself, HP admitted that it was too large and not flexible enough.

Merging with EMC?
According to Business Insider "for almost a year it has contemplated merging with EMC to create what would be one of the biggest enterprise companies in the world". After the merge was not realized, HP was splitted.

The contemplation of merging with EMC looks like, no lessons were learned from HP's Compaq's merge in 2002 and no lesson learned from EDS acquisition in 2008. 

You can read the section "Issues in HP-Compaq merge" in my post: Vendors Survival: Will HP Survive until 2018? - HP's EDS acquisition First Take and replace the name Comapq by the name EMC and many of the sentences I wrote then would be true for an HP-Compaq merge. For example, there will be an overlap in Storage production.

Which HP will survive, if any, for the Long Term?
It seems that the probability that HP will survive is higher than the probability that Hewlett-Packard Enterprise will survive. 

It is easier to focus and adapt if you have two Business Lines (HP's Printers and PCs) than when you have multitude of products and Business Lines (Hewlett-Packard Enterprise). 

It is easier to survive when you are a Market Leader in the PCs market and the leader of the Printers market.   
I had read predictions of shrinking PC market. I did not read predictions of shrinking Printers market.
I read predictions of emerging and growing 3D Printers market. Well, if HP will adapt...

It is easier to survive when you have more resources. More than half of HP's revenues are from its PCs and Printers business.

I would not be surprised if after three or five years a part of the merge between EMC and HP will take place by EMC acquiring Hewlett-Packard Enterprise's Storage business.


1 comment:

Anonymous said...

Very interesting analysis. I read all articles and your long term sceptical prognosis for HPE is confirmed at least by the sell of the software business to Micro Focus. Basically one part of the remaining HP's was sacrificed in the interest of investors. The strategy for the HPE structure is still unclear.
In case you are interested in exchanging similar analysis for other IT companies:

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