http://online.wsj.com/article/SB10001424053111903596904576518810271024274.html?mod=WSJ_hp_LEFTTopStories
Restructurings are never pleasant. Most analysts will tell you that companies should only “pull the trigger on change” when the market says you can do it. I recently heard the line “you don’t change horses mid-stream”. I think FDR said that. To some extent it all makes sense.
However, here is the problem when you look at the specific problems and challenges that H-P is facing you realize the company has no choice but to move forward now. The problem with waiting for the markets to give H-P the green light to take action is always when disaster is knocking on the door of the company.
What stock analysts fail to realize is that companies do not turn on a dime.
Right now, H-P is exploring their options. I applaud the company for being bold enough to start looking now and telling their shareholders it sees troubled waters ahead.
The problem with waiting until disaster knocks on the door of the company is that when disaster occurs, meaning revenue has fallen drastically and market share has dropped drastically, shareholders expect a miracle to occur and the company make some kind of instantaneous change and BAM!!! Suddenly all is right with the company.
Operational Restructuring 101 – do not wait until disaster is knocking on your door but take appropriate action early. As it stands, H-P has been monitoring its falling revenue and tiny margins grow even smaller in the computer business. H-P is not shedding or even thinking of shedding its cash cow of printers and printers ink businesses. H-P is facing a “now or never” scenario. If the company fails to take action now, whatever action it takes later will be too little too late.
H-P’s CEO, Leo Apotheker, is taking the appropriate steps at ensuring the company’s future.
I understand why shareholders are nervous but the alternative is a rapid corporate death through obvious revenue losses in the computer business.
Instead of criticizing Leo Apotheker, do the analysts have a suggestion as to how H-P can increase revenues without having to spend a fortune on acquiring other computer companies?
Now, I agree with concerns about Autonomy. I am concerned that H-P paid a high premium for the company. Mr. Apotheker has not gained shareholders’ trust yet; he is new. He spends about $10.25 Billion on a company. Worse still, Mr. Apotheker just spent $10.25 B of the $12.9 B cash the company has. Yikes. Talk about bold moves.
H-P has very few choices left open to it. Autonomy is a good way for H-P to move into the information analytics business. I am a bit nervous about the price tag. The upside of buying Autonomy is that it is an existing business and is generating revenue now. This means it can hit the ground running for H-P.
However, I will be less nervous if H-P can sell off its computer business to someone else soon. I was not kidding when I suggested that either China or Mexico would make good buyers. H-P’s computers are already being built in China so it makes sense that a buyer from China can purchase the company. However, I also think that Mexico is a good candidate as well.
Mexico is looking at getting into the semiconductor chip sector and hence would make a good candidate to purchase the business unit.
Whoever buys H-P’s computer division will have to be an ambitious and bold operator.