Leading like Mad Leo: HP's Whitman rolls out Apotheker's PC plan

The executioner turns gambler as HP's PCs are set to go

Shock split

Apotheker’s announcement that he was canning HP’s PC business caused a storm. He was eventually axed by the board, in less than a year, in part because the signature PCs and printers continued to fall. He was not “executing.”

Whitman’s plan for HP had been for a turnaround by 2016 and there was never any suggestion that the PC or the printer businesses were going. Far from it: in February 2013 Whitman denied that there was any plan to sell the PC unit.

Rather, Whitman’s plan had been for revenue in line with US GDP by 2016 with operating profit growing faster than revenue.

The timing of the split is telling, coming weeks before HP announces full-year results. The third-quarter was looking reasonably positive. What did Whitman see?

Now, HP says the split will give each entity “enhanced independence, focus, financial resources and flexibility to adapt quickly to market and customer dynamics.”

Her new bet is odd.

The timing is off, given sales of PCs were actually up in HP’s latest quarter – reported in August – suggesting the worst of the PC slump is over.

In the company’s most recent, third quarter, enterprise — the engine of the new company soon to be headed by Whitman — saw sales down in services, business-critical systems and software. Just networking and x86 servers were up.

The bet is odd: HP is going into this new enterprise market against powerful incumbents and motivated challengers.

It’s going into x86 servers and systems against Dell, a de facto standard in hyper-scale data centres in recent years, and Lenovo – aggressive on price and energised in the belief it can turn IBM’s x86 server business into a fat and profitable cash cow.

Ah, but there's software and cloud. These are fast growing and rich in margins for others, but they are still small change at HP and it’ll be years before income from these can be counted in billions of dollars.

Whitman will be more reliant than ever on her juniors. She hails from an internet background and has relied on her experienced execs to make and sell the systems.

The question will be just how many subordinates are among the 55,000 who get cut, and whether their loss will mean a repeat of Hurd’s devastating EDS cull.

Whitman has now firmly secured her place in HP’s history as the latest CEO to shake up one of Silicon Valley’s oldest and best-known names. The question is whether or not her break-up plan is also consigned to the same fate as those big ideas of Hurd and Fiorina. ®