Feeds

Hewlett Jr outlines Merger Plan B

It's Plan A - but with more Printer Ink

  • alert
  • submit to reddit

Bridging the IT gap between rising business demands and ageing tools

There's still a month to go before Hewlett Packard and Compaq shareholders get to vote on the Sircam merger, but the battle lines are now more clearly drawn.

After months of sniping, DNA-approved dissident Walter B Hewlett has proposed his own personal course of action for HP, and what do you know, it radically differs from Carly's industrial combine.

Unfortunately,however, it's just as flawed as the official merger plan, only it appeals to different sensibilities. It's designed to tickle different greed-spots.

Hewlett Jr suggests that HP should focus on its printing and imaging division, the part that generates the most revenue per employee. As indeed it does. HP owns the laserjet workgroup printer business, and has a significant share of the PC deskjet business too.

It can pull stunts such as reducing the amount of ink in a DeskJet cartridge by 40 per cent, while keeping the retail price the same. This is a wheeze it pulled a couple of years ago, and we're still waiting for the first expose. In short, HP names the price.

But rather than keeping this cash-cow in-house, Hewlett offers a suggestion designed to whet boomtime investors appetites: a spin-off. He thinks the imaging and printing division should be IPO'd as quickly as possible, bringing an immediate cash windfall to the company.

HP spun off its Agilent division - that's the bit which the original Hewlett and Packard founded in a garage it makes scientific lab equipment), - when Fiorina took the throne. Agilent has done swell, and HP has regretted its departure ever since.

Where this leaves HP's PC, server and storage businesses is a good question - for all are subsidized by the printing business.

In fact a printer-less HP would have little option but to merge and consolidate, only it would be negotiating from a much weaker bargaining position.

In the past fortnight, HP has stepped up its advertising blitz with double-page spreads designed to show that a merged HPaq would be number one in many of the markets in which it currently it plays third, fourth of fifth. But this is kindegarten maths which assumes that customers will blindly migrate to their new parent. Hewlett's previous interventions have been well made, and remind us that corporate mergers are painful, and customers have a tendancy to wriggle away from the proscribed course.

But at least there's a distinction. Hewlett proposes a windfall, followed by a rapid extinction of the server, storage and PC businesses. Fiorina dreams of a mighty IT complex, but proposes no logic to the merger other than might is right.

Now isn't it extraordinary how little out of the box thinking is going on here? It's a depressed market, one that's ripe for cash-rich giants to make strategic acquisitions. With a little planning, HP could acquire crucial technologies for wireless and infrastructure investment.

For example, Qualcomm has been fingered as a takeover target by Nokia, and most recently by Intel. It owns key 3G patents, and while far from being the spectacular ubermesch its boosters advocate, is still a nice little earner. Many other weakened players could help HP's infrastucture: Nortel, for example; or BEA. Or the owners of vast, empty hosting sites across this great continent.

You don't need to be spectacular to win in this business, only shrewd. And for HP to win, it strikes us that the most sensible course of action is simply to carry on being HP. Right now, it's a company whose strengths are apparent only to its rivals. It's not a Sun, and it's not an IBM. But it spends an inordinate amount of corporate attention trying to be both, when it needn't be either.

With 88,000 employees, and with a healthy order book, this is no way for a grown-up company to behave. Alas with just the two dismal visions - the Fiorina slow-death, or the Hewlett fast-death - on offer. ®

Build a business case: developing custom apps

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple ran off to IBM
But never fear fanbois, you're still lapping up iPhones, Macs
Nadella: Apps must run on ALL WINDOWS – PCs, slabs and mobes
Phone egg, meet desktop chicken - your mother
ITC: Seagate and LSI can infringe Realtek patents because Realtek isn't in the US
Land of the (get off scot) free, when it's a foreign owner
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Samsung threatens to cut ties with supplier over child labour allegations
Vows to uphold 'zero tolerance' policy on underage workers
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
You! Pirate! Stop pirating, or we shall admonish you politely. Repeatedly, if necessary
And we shall go about telling people you smell. No, not really
prev story

Whitepapers

Seven Steps to Software Security
Seven practical steps you can begin to take today to secure your applications and prevent the damages a successful cyber-attack can cause.
Consolidation: The Foundation for IT Business Transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.
Consolidation: the foundation for IT and business transformation
In this whitepaper learn how effective consolidation of IT and business resources can enable multiple, meaningful business benefits.