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    Strategic Change, Execution Blunder (Part 5) – Does Hewlett Packard Know What It Wants To Be?

    By Claus Schafhalter | October 19, 2011

    HP is the proverbial Silicon Valley company: Conceived in a Garage in Palo Alto by Bill Hewlett and Dave Packard it grew into a multinational Information Technology powerhouse. Along the way it shed important businesses (its precision measurement devices was spun off into Agilent), and it acquired major businesses like Compaq Computers and EDS, a huge IT services operation. It also acquired smaller players like networking specialist 3Com and struggling mobile phone maker Palm.

    On the leadership side HP seemed to struggle to find the right leader for the IT giant. While Carly Fiorina (CEO from 1999 to 2005) oversaw the merger with Compaq, Mark Hurd (CEO from 2005 to 2010) acquired EDS and Palm. Leo Apotheker (CEO from late 2010 to September 2011) seemed to try to steer the HP tanker to a more services / Software company. Apotheker himself came form German Software giant SAP, where he was ousted as CEO reportedly because of major customer and employee discontent with his actions and leadership.

    At HP Apotheker took over when HP’s share price was in the mid forties and market cap was in the $80 Billion area. Starting around March 2011 HP’s share performed poorly. However, Apotheker’s moment came when he uttered that HP wild change strategy, will shed the PC-hardware business and concentrate on Services and Software. The stock market reacted and within days HP’s value plummeted from around $ 75 Billion to about $47 Billion. Nice job.

    Now, also the board reacted, Apotheker had to go (receiving a multi million severence package), and ex-Ebay CEO Meg Whitman took the reigns.

    So, what went wrong at HP? Is the sharp drop in corporate value Apotheker’s fault? Which role plays the board, and why is it that a CEO utters something about divesting the Hardware business publicly without demonstrating why it is good for stake holders and nhow it will be done to not damage the corporation?

    Can  you see a pattern between Steven Elop’s “Burning Platform” memo that sent Nokia into a tailspin, Reed Hasting’s price increase and retreated Qikster spin off from Netflix, and Leo Apotheker’s musings to get rid of the PC Hardware business? How is it that these well paid CEOs destroy Billions and Billions of Dollars of shareholders wealth overnight, and can stay on or get rewarded with a severance package many multiples higher than the life time income of professionals.

    I will post a discussion why it went wrong in these companies in part 6 of this series.

    Claus Schafhalter, Management Consultant @ Sunogos


    Find the other installments of this series:

    Strategic Change, Execution Blunder:

    (1) Part 1 – Introduction
    (2) Part 2 – What Happened At Nokia

    (3) Part 3 – Netflix’ Troubles

    (4) Part 4 – Netflix Commits A U-Turn

    (5) Part 5 – Does HP Know What It Wants To Be?


    Topics: Change Management, Strategic Change, Strategic Execution | Comments Off on Strategic Change, Execution Blunder (Part 5) – Does Hewlett Packard Know What It Wants To Be?

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