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| HP and Lew Platt are
splitting up
Like a runway model changing hats, HP announced some obvious but not-yet-significant changes to its look in early March, promising to spin off its Test and Measurement business and get a new CEO for its remaining computer operations sometime next year. HP briefed stock market analysts first about its March 2 news that it would be splitting — giving the most cynical of customers some perspective about why HP’s $7.6 billion roots will be severed from its $47 billion tree by next year. HP is restyling itself as a computing and imaging company, a cosmetic realignment to bundle the rest of its business under. Gone will be the instruments and components that Bill Hewlett and David Packard founded the company on 60 years ago, along with chemical-analysis and medical businesses. HP’s announcement included promises that the computing and imaging spinoff will make the company’s computer offerings better understood in the marketplace. HP’s stock rose less than $3 a share on the news — although few were sure if the lift came from seeing HP streamline itself or learning that Lew Platt will help find a successor to his CEO post. By week’s end after the announcement, it was trading about where it had begun, and hadn’t recovered what it had lost after the 1999 first quarter report. Platt will not be missed by much of the HP 3000 community when he departs in 2000. A veteran of HP’s Unix workstation business when the HP board named him as the fourth CEO in company history, the leader oversaw a time of steep decline in HP 3000 fortunes and focus for Hewlett-Packard, a slide that accelerated after he took over HP’s reins. HP’s business more than doubled in those years, and its stock enjoyed a pair of two-for-one splits in the last few years. HP achieved average profit increases of 46 percent a year from 1993 to 1997. But the company’s willingness to feed live HP 3000 customers into the ovens of its Unix jihad went unchecked at HP’s highest levels during the period, at least until Windows NT complicated HP’s “Unix is good for everything” message. Platt’s tenure was a period that saw HP create a product with a datasheet advising customers how to convert HP 3000 systems to HP 9000s — a type of system switchover never before or since available from HP for any other enterprise platform. The HP 3000 business righted itself and grew in the last few years under the guidance of general manager Harry Sterling, but only after NT clouded the Unix-mania rampant in Platt’s earliest CEO years. Platt’s departure will signal the complete elimination of an HP 3000 management chain of command that guided MPE/iX into a secondary, supporting role behind HP-UX for enterprise computing. HP’s fiscal performance may have been the chief impetus in its early March hat trick. Stock market analysts have been disturbed over the company’s inability to continue a meteoric revenue and earnings climb. Figures released for the first quarter of fiscal 1999 could have provided the exit cue for Test and Measurement as well as Platt. HP posted a $960 million profit for the 90 days ending Jan. 31, but even beating 1998’s first quarter profits by $41 million didn’t please analysts. HP had bought back 3 million shares of its own stock during the year, making the quarter’s 6 cent per share improvement seem even smaller. The financial numbers for HP operations drew further suspicion in the revenue columns, where sales were up only 1 percent from 1998. Sales of the company’s Unix servers fell in the period, something the company explained away by saying customers are waiting for a now-overdue line of new Unix systems later this year. Stockholders sold down HP’s shares more than 8 percent on the first quarter report news, looking at things like a 2 percent sales decline in the US and profits propped up by striking cost control measures. Overseas sales now account for 57 percent of HP’s revenues, so their modest 3 percent growth let HP escape an overall sales decline quarter to quarter. More than half of HP’s business today is in printers, scanners and printing supplies, and that percentage will certainly increase once HP spins off the 16 percent of its sales that weren’t related to computing. The slimmed-down HP will give the HP 3000 Commercial Systems Division a larger relative revenue role in the new company, but HP 3000 business remains smaller in sales than many other groups and all of its enterprise-class computing choices. Profits from the 3000 business are another matter, but it’s a well-known fact that the computer brings in a greater percentage of profit than HP’s NT or Unix systems sold in highly-competitive, commodity style markets where margins must be smaller. And the company’s slowing pace on profits has become more noticeable. The stock has under-performed the Dow Jones average that it’s now part of, and although HP is growing, IBM is growing its profits and revenues at a faster pace. IBM posted 74 percent more sales than HP in 1998 — but racked up 117 percent more profits than HP. That spread makes a company strong, investors happy, and employees well-compensated. On balance, it appears HP doesn't have the kind of IBM-like size to try and perform in all the markets it is trying to embrace — especially the lower-profit ones like NT, Unix and yes, even printers. Spinning off a test and measurement operation that was dropping faster than even the Unix sales will simply aim the spotlight on HP’s challenges to manage a too-diverse product line. The impact of other HP
reorganizations on the 3000 could be measured months after the
announcements, but this spinoff will require more than a year to make
itself felt. The division’s management chain remains intact aside from
the intention to replace Platt. Speculation on a successor embraced two
strategies: an existing HP vice president’s appointment (such as a
promotion for Ann Livermore, who heads up HP’s enterprise server and
services businesses) or an outside candidate. Some analysts said that any
inside HP manager who might be picked for the CEO post would have already
been named. HP did name Ned Barnholt to head the new Test and Measurement
company. Platt joins HP Board members John B. Fery, Sam Ginn and Richard A.
Hackborn in a special committee that will conduct a search for a chief
executive officer for the new computing and imaging company. Platt, who
started HP down a path of examination by outside consultants last year to
fix its business stall, said an outsider would be “more likely to ask
questions you hadn’t thought of.” We can think of one for the new
CEO: “What’s so great about staying so deep in the commodity
computing business?” Copyright The 3000 NewsWire. All rights reserved |
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