I had just departed IBM when Lou Gertsner, joined the company as IBM’s CEO. In some ways, seeing Meg Whitman enter into HP feels like a throw-back to his entry. The naysayers that have stood at the side lines and stated HP is dead would do well to take note.
In 2000, IBM was relatively financially healthy, but under a great deal of pressure from many fronts. EDS was taking business away via outsourcing and IBM’s services delivery model was hindered partially due to the consent decree. The mid-range systems group was losing to DEC and an upstart called SUN. The Open Systems movement totally threatened IBM’s core business. On the software side, Oracle was replacing their cash cow IMS/DB, and DB2 was not competing well. IBM had started down a path of dis-aggregating itself into different brands, diluting the IBM base. IBM’s PC business, while had done very well in the past was eroding margins.
When Gerstner arrived the market had already decided that IBM was entering a period of decline, possibly leading to a long drawn out death.
Fast forward to today, and reflect on the HP’s status. It has been two years since HP gathered the analysts to hear their vision. During this time Meg Whitman began by inspecting, assessing and was slow to take calculated actions—just what Gertsner did during his first 18 months. Gertsner, the outsider from RJR Nabisco, took the time to understand IBM’s core value propositions, focus on its most valuable assets – its people and customers, and make the adjustments needed before he delivered his vision for IBM to the market.
As for Whitman, it was apparent from the March 6-7 HP Analyst event that she has gone well below the big ship’s deck looking for what is working, doubling down on the core of HP (“we are an engineering company”) and making investments as needed. At the same time, she has told Wall Street to get a grip as she executes her strategy. And she has communicated that strategy to the HP organization showing that she is willing to invest in where the there is evidence of success.
At the HP Analyst Days, Meg Whitman pointed towards the Enterprise Group’s (46% of their profits) recent storage announcements as evidence of success (3PAR StoreServ 7000 deliveries are backlogged), HP networking in the No 2 position, and the Moonshot server being the next big thing.
So what do we expect? It is clear the HP organization is energized on many levels. HP’s Board appears to be respectful and willing to give Meg room to execute. With the evolving line-up of servers, storage, networks and printers, HP may be able to take-on the full IT infrastructure, her vision for the sea-change. Based on what we observed at the HP Partner event in February, we believe that the field is engaged and believes in the new products. The long term keys will be to turn the EDS group into something that drives business for the organization, and tying the “HP INVENTS” into future product releases that lead the market demands. As for storage, I stated it once before, it is a chance to have 110,000 conversations with EVA customers and make the market. It won’t be tomorrow, but for those that hold a long view on companies, I think Whitman is up there with Gerstner.
