Meg Whitman steers HP straight at the rocks

If Captain Queeg and Captain Ahab were commanding the same ship, you wouldn’t be surprised if it wound up on the bottom of the ocean. Now we have Captain Meg Whitman and First Mate Todd Bradley steering the SS Hewlett-Packard — and one of Silicon Valley’s iconic companies is lurching ever closer to the rocks.

Whitman’s decision to merge the company’s PC and printer divisions is without a doubt the worst business move the company could have made. (OK, it would have been worse to sell off the PC arm, but barring that. … ) Whitman has taken two not really related businesses that need help and glued them together in a way that’s sure to minimize their individual strengths and maximize their weaknesses.

Even worse, in Bradley she has chosen a second-rate executive — remember his abysmal record at Palm? — and put him in charge of a group that will be responsible for roughly 50 percent of the company’s revenue.

There’s a reason why it’s generally a bad idea to hire a CEO who has no experience in the computer business to run a computer company. Not to be mean, but can’t you just picture Whitman thinking: “Mmm, people connect their computers to their printers, so they’re really kind of the same.” D’oh!

“Instead of innovating, HP is masking the incompetency of the PC business by merging it with the stronger printer business,” says Trip Chowdhry, principle analyst of Global Equities Research, in a scathing note to clients.

As many of us predicted when she was hired, Whitman was a terrible option and she’s the hands-down choice for TBL’s bozo of the month.

Different business shouldn’t be in the same bucket Nobody would think that cats and dogs are the same because they both have four legs, but that seems to be how Whitman views the printer and computer businesses. Here are four reasons they’re different (thanks to Chowdhry for his help).

• Purchasing decisions: People and companies make those decisions separately. Yes, bundle deals are common, but those transactions work just fine with a little bit of cooperation between the two sales forces.
• Business drivers: New releases of Windows drive PC upgrade cycles, where premium prices can be charged during replacement waves, at least for early adopters on new twists to the PC itself — that’s the rationale behind Intel’s Ultrabook effort, for example. By contrast, the printer business is driven by the razor-and-blade model; the money is made from ongoing sales of ink and laser toner, not the printers themselves.
• Choice: Because of the clear separation between HP’s printer division and PC division, other manufacturers such as Sony and Acer frequently do joint promotions with HP Printers. If the divisions are merged, the existing conflict-of-interest issues become even more severe and risk choking off an important line of business.

Chowdhry is hardly the only Wall Streeter who doesn’t like the move. Commenting on the way PCs and printers are purchased, Shaw Wu, a veteran analyst at Sterne Agee, says, “More often than not, customers buy them separately. In addition, both follow different product cycles, with PCs much quicker at one to three years versus printers at three to five years and possibly longer.”

HP needs a different kind of help as BYOD and consumerization grow I’m not arguing that the two divisions don’t need help. They do. In the last reported quarter, the PC group’s revenue declined 15 percent year over year (shipments were off 16 percent globally, 26 percent in the United States), while printing group’s revenue declined 7 percent.

But why glue them together? And why put Todd Bradley in charge? He’s been running the PC business for six years, and during his tenure, HP has been out-innovated and outmarketed by Apple and others; its reputation for quality workmanship has declined and its messaging has been muddled.

To be fair, as Gartner analyst Mikako Kitagawa tells me, HP has been quite consistent in holding on to margins in the PC business, a real accomplishment. The company’s share of the PC market has also been reasonably stable, averaging 18 percent since 2007, according to Garnter. HP credits Bradley with growing PC revenues by 30 percent since 2005, whereas printer revenues have fallen. Of course, PC sales have been falling in more recent years.

Some of the plunge in shipments last year could be attributed to HP’s dithering on whether it would sell off the PC unit (gratis ex-CEO Léo Apotheker, the gift that keeps on giving), so it’s not fair to blame Bradley for that one. But he’s not the visionary needed by HP to compete in the era of BYOD and consumerization.

Unlike smartphones and tablets, PCs are still an enterprise buy. But as my InfoWorld colleague Galen Gruman points out, that’s changing. The success of bring-your-own mobile devices is tempting corporate execs to consider the benefits of letting employees use and support their own PCs. I haven’t seen numbers on this trend, but it’s probably still fairly small.

However, it will happen. Selling fleets of beige PCs to volume buyers is very different than selling them to empower employees. There’s nothing in Bradley’s record to indicate that he can lead the division in a new — and very difficult — direction. Don’t believe me? Check out HP’s mobile strategy, which he led. Right — there isn’t one.

HP’s PC business needs a creative and strategic remake, but its fundamentals, as measured by margins and market share, aren’t bad. Combining it with another troubled business won’t lead to more innovation and, in fact, may detract from its decent fundamentals. And how will that help the printer business, which has already angered customers by sneakily reducing the number of pages ink or toner cartridges will churn out? Sure, there will likely be some cost savings, but as the last three CEOs of HP have learned, cost savings are not the road to success.

This is a terrible move that will cost jobs in a company whose string of terrible CEOs has already resulted in tens of thousands of layoffs. My only comfort: As a Californian, I’m relieved that Whitman, a failed candidate for governor, isn’t running my state.

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This article, “Meg Whitman steers HP straight at the rocks,” was originally published by InfoWorld.com. Read more of Bill Snyder’s Tech’s Bottom Line blog and follow the latest technology business developments at InfoWorld.com. For the latest business technology news, follow InfoWorld.com on Twitter.