2012 was full of stock-crushing news for HP, from layoffs to writedowns to its strange mess with Autonomy.A new, in-depth story in Businessweek documents all the missteps that sent the company’s shares down 70 per cent since August 2010, erasing $68 billion in shareholder equity.
But, as Businessweek reporters Ashlee Vance and Aaron Ricadela point out, the company didn’t get here in one year. And amid all the errors and missteps, there have been some bright spots—good decisions and fundamental strengths that give hope for a turnaround.
Current CEO Meg Whitman is HP's fourth chief executive in two and a half years. All but Cathie Lesjak, the CFO who filled in as interim CEO, have come from outside the company.
They are Carly Fiorina, from Lucent; Mark Hurd, from NCR; Léo Apotheker, who had been fired from SAP; and Meg Whitman, from eBay and a failed bid to get elected governor of California.
HP's current executive chairman, Ray Lane, is also an outsider. He worked at Oracle for most of his career, then VC firm Kleiner Perkins.
If HP's implosion doesn't force her out, Meg Whitman has promised to stay on for at least five years.
HP's board has promised that Whitman's successor would be promoted from within. This is something longtime HP supporters wanted to hear.
Top contenders today include chief strategy officer Bill Veghte; David Donatelli, head of HP's Enterprise Business; and Todd Bradley, who runs the PC-and-printer business.
Most long-term HP employees will tell you that HP's problems began with Carly Fiorina and her attempt to ditch HP's stodgy but hardworking and open culture.
She bought aeroplanes and put barbed wire around the executive parking lot. She won a contentious battle with shareholders to push through an acquisition of Compaq, which split HP's culture and 'set it on the path toward becoming a slave to the supply chain rather than a company obsessed with invention,' Businessweek's reporters write.
And it was during Fiorina's tenure that boardroom leaks to reporters became a massive scandal that showed how dysfunctional HP's leadership had become.
What scares investors today is that the company heavily relies on commodity products like PCs, plain-vanilla servers, and printers.
But thanks in large part to Hurd's cost-cutting, the company is still generating more than $12 billion in operating income a year.
But Hurd's cost-cutting became almost maniacal.
True, he eliminated obvious fat, like $100 million a year spent on consulting firms. But he also revamped the the bonus structure in a way that displeased employees.
And he insisted on inexplicable cost-saving measures, like turning the lights off at 6 p.m. at some facilities to save on electric bills so employees couldn't work late, Fortune previously reported.
He also closed offices and let HP's internal IT systems decay, Businessweek reports.
The Compaq deal made HP the largest player in the PC business, a lead it maintained under Fiorina and Hurd. It remains the dominant seller of PCs and servers to large corporations, though not unchallenged. Lenovo recently edged HP out as the No. 1 PC maker in the world, but HP is a very close second and popular with corporate buyers. And HP shares the No. 1 spot for server sales with IBM, IDC says.
Even the President of the United States only gets four years to do big things.
Yet Meg Whitman wants five years.
Meanwhile, she has spent her first year announcing one horrible bit of news after another: layoffs that will cut 29,000 jobs; an $8 billion writedown on its $13.9 billion EDS acquisition, another $8.8 billion writedown on its $11.1 billion Autonomy acquisition; an admission that it discovered $5 billion worth of fraud in Autonomy's books.
IDC analyst Crawford Del Prete tells us the company needs to show top-line revenue growth in 2013, not a far-off 2016.
It's become trendy for Wall Street analysts to call for HP's breakup.
Mere rumours that activist investor Carl Icahn was interested in HP and would force a breakup sent the stock climbing in early December.
HP has said it won't disband.
But HP has said it could sell some weaker units. Those could be small things like its online-printing service, Snapfish, or big things like its troubled outsourcing business.
HP has no game in mobile beyond making Windows 8 tablets for businesses. When it killed WebOS, it destroyed Palm, the mobile company it acquired for $1.2 billion in 2010.
Palm's leader, Jon Rubinstein, left HP a year ago and the remnants of the unit are now called Gram. This could even be one of the units it sheds. It's hard to see how HP will acquire the people, products, and market share it needs to become relevant.
Whitman has said that HP needs to create its own smartphone, but she also said that the phone won't be happening in 2013 and it can't lose billions getting into the business.
HP has the technology to remain a critical player in the enterprise IT world, particularly when it comes to cloud computing and corporate networks.
Although it may have overpaid for Autonomy, between Autonomy and another acquisition, Vertica, it's got some game in the big-data market, too.
If Whitman can stop the boardroom drama, post top-line revenue growth in 2013, trim off weak units, find a strategy in mobile and streamline its dysfunctional culture, the company can absolutely turn itself around.
That's a big 'if,' though. rumour has it that the private-equity folks are circling and would consider buying and disassembling HP if the stock hits $10/share.