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HP, Dell: PC makers in desperate need of a reboot
Question of the Day
SAN FRANCISCO (AP) - Hewlett-Packard Co. used to be known as a place where innovative thinkers flocked to work on great ideas that opened new frontiers in technology. These days, HP is looking behind the times.
Coming off a five-year stretch of miscalculations, HP is in such desperate need of a reboot that many investors have written off its chances of a comeback.
Consider this: Since Apple Inc. shifted the direction of computing with the release of the iPhone in June 2007, HP’s market value has plunged by 60 percent to $35 billion. During that time, HP has spent more than $40 billion on dozens of acquisitions that have largely turned out to be duds so far.
“Just think of all the value that they have destroyed,” ISI Group analyst Brian Marshall said. “It has been a case of just horrible management.”
Marshall traces the bungling to the reign of Carly Fiorina, who pushed through an acquisition of Compaq Computer a decade ago despite staunch resistance from many shareholders, including the heirs of HP’s co-founders. After HP ousted Fiorina in 2005, other questionable deals and investments were made by two subsequent CEOS, Mark Hurd and Leo Apotheker.
The latest reminder of HP’s ineptitude came last week when the company reported an $8.9 billion quarterly loss, the largest in the company’s history. Most of the loss stemmed from an accounting charge taken to acknowledge that HP paid far too much when it bought technology consultant Electronic Data Systems for $13 billion in 2008.
Like HP, Dell missed the trends that have turned selling PCs into one of technology’s least profitable and slowest growing niches. As a result, Dell’s market value has also plummeted by 60 percent, to about $20 billion, since the iPhone’s release.
That means the combined market value of HP and Dell _ the two largest PC makers in the U.S. _ is less than the $63 billion in revenue Apple got from iPhones and various accessories during just the past nine months.
They are also scrambling to catch up in two other rapidly growing fields _ “cloud computing” and “Big Data.”
Cloud computing refers to the practice of distributing software applications over high-speed Internet connections from remote data centers so that customers can used them on any device with online access. Big Data is a broad term for hardware storage and other services that help navigate the sea of information flowing in from the increasing amount of work, play, shopping and social interaction happening online.
It’s not an impossible transition, as demonstrated by the once-slumping but now-thriving IBM Corp., a technology icon even older than HP. But IBM began its makeover during the 1990s under Louis Gerstner and went through its share of turmoil before selling its PC business to Lenovo Group in 2005. HP and Dell are now trying to emulate IBM, but they may be making their moves too late as they try to compete with IBM and Oracle Corp., as well as a crop of younger companies that focus exclusively on cloud computing or Big Data.
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