Hewlett-Packard is holding a summit this afternoon in San Francisco to discuss its strategy and business for the coming year, and we’re on hand.Here are the takeaways:
- Big cloud push. HP is building a cloud platform to compete with Amazon Web Services, Microsoft Windows Azure, and Rackspace. Some of the technology will be homegrown, some will be acquired or provided by partners. (It’s possible, for example, that the HP cloud is built partly on top of Azure.)
- App marketplace. There will also be a unified online marketplace for consumer and business apps. Most of the apps will be built by partners — HP isn’t going to build an ERP app, for instance. But it is going to focus on security, data analytics, and management.
- Web OS is coming. Expanding on previous announcements, Apotheker said that HP would release a beta version of WebOS running in a Web browser on Windows PCs by the end of the year. Apotheker took pains to note that Microsoft remains a strong partner, but said that HP is waiting for “the right version of Windows” to ship a Windows tablet. In the meantime, it wants to make the TouchPad a success.
HP also announced a 50% increase in its quarterly dividend to $0.12 per quarter.
The strategy makes sense: like Microsoft, HP has built its business on the PC revolution and on-premises enterprise software. As everything moves to the cloud, HP has to make this move.
So at least Apotheker is thinking along reasonable lines. The big question is whether HP will be able to execute on this vision.
Here’s our coverage of the speech and Q&A:
1:04PT: Waiting for the event to start. HP is holding the event in the Yerba Buena centre for the Arts, which is where Apple often has its product announcements. It’s a lot less crowded, though.
1:05: Investor relations VP Steve Feiler is on stage doing housekeeping, disclosures, agenda, and so on. Leo will be talking vision and strategy in a few minutes.
1:10: Now we’re watching an intro video.
1:13: Leo is taking the stage to techno beats. He’s been HP’s CEO for 4 and a half months. He’s been digging in to the business, talking to customers, investors, and teams. He’s discovered some businesses that are doing well, and some that need help.
1:14: HP’s vision is to provide “seamless, context-aware experiences for the connected world.” The slogan: Everybody On.
1:15: Today,we stand at an inflection point. Our spirit of innovation is alive and well. “Cool WebOS connected devices” demonstrated on February 9.
1:16: Financially strong: record of providing EPS growth. He’s talking about all of HP’s business areas now — enterprise, consulting, laptops, desktop PCs, and of course printers. Huge scale. One of the world’s most powerful brands.
1:17: “Yes, HP is strong. But we also recognise that the world around is changing faster than ever.” Consumerization, cloud computing, and connectivity are big trends. People no longer separate their personal and professional lives. “If there’s a better answer than enterprise-supported solutions, they’ll use it.”
1:18: On premise proprietary computing resources are being augmented, sometimes replaced, by the cloud.
1:20: Look at what the cloud has done to the music industry, and think about what it might do to publishing.
1:21: To succeed, need to reach across consumer, small business, and enterprise, plus huge delivery channels.
1:22: Today’s technology is built in proprietary stack — we understand this world deeply and will provide leadership.
“Margin-rich” areas: #1 in services, #2 in networking. As you move up to devices, “we’re also extremely powerful.” Ships 2 PCs and 2 printers every second. Huge installed base due to #1 position.
“People like working on PCs and that isn’t going away. And people need to print.”
1:25: Printing is how you bring content from online world into physical world. Shipped more than 3 million Web-enabled printers in Q1.
1:27: Hybrid environment that combines private and public clouds will be common. HP supplies “turnkey’ systems for both private and public clouds. Services is key — “our people are already on the ground.” HP has been working with Dreamworks since Shrek 2 — HP used a farm of servers that Dreamworks leveraged. Since then, they’ve built a private cloud for Dreamworks running exclusively on HP.
OK, here’s the strategy:
- optimise traditional environments
- Build and manage cloud-based infrastructure
- Enable transformation to hybrid models
- Define and deliver the connected world from consumer to enterprise
We will build our own cloud service, we’ll be building a public cloud in the future.
Platform services — sounds like competition with Amazon Web Services.
A brand that’s trusted by both consumer and enterprise, build, deploy, and test services.
Building an open marketplace — consumer app store, enterprise services.
1:31. Connected experiences. Scale and global reach are an advantage. Potential to deliver more than 100 million WebOS enabled devices per year — PCs, TouchPads, and printers. Operating system, WebOS, provide one interface across fully connected life, home, road, and office.
1:33: Connecting it all together is software. HP is one of the world’s largest commercial software suppliers.
1:35: For information management, we don’t have a legacy franchise to protect. Our recently announced agreement to acquire Veritica (analytics provider) shows the direction.
1:36: Big data, cloud-scale, real-time analytics.
1:43 A long on-stage demonstration of Vertica, which is as exciting as it sounds. Basically, Vertica lets businesses process and analyse huge amounts of data very fast. Vertica willb e marketed as software and a service, as well as an appliance (a piece of hardware that businesses put on their networks).
1:44: Now, security. The shift to the cloud makes traditional approaches “totally inadequate.” HP is the fifth-largest IT security company int he world. Focus is security backbone, integrated with systems management.
1:46: We intend to be the platform for the cloud and connectivity. A single open market that integrates consumer, enterprise, and developer services.
1:48: Example: counterfeit drugs. 75 billion dollars worth of medication is counterfeit, estimated. HP joined with MPedigree (sp?) to address this issue. Using a basic mobile phone, users can read a unique code from a label, then text a message to MPedigree to tell whether the drug is real. It’s launched in Nigeria and Ghana. HP provides the technology.
1:49: Evolutionary — today’s strategy will feed core businesses, not replace. Expand gross margins. “Disciplined acquisition strategy.”
1:51: Personally focused on growth.
1:53: Leo has left the stage, but will be taking questions in a few minutes. Stay tuned….
1:55: Now HP’s CFO Cathie Lesjak is on stage, talking about how HP will keep growing. Geographic expansion, building out the sales force.
1:56: Drive more solution selling across our portfolio — in other words, HP wants to be more like IBM. Invested more than $50 billion in last 5 years in R&D and M&A.
Capital allocation: First priority is investing into the business. capex, internal investments, and acquisitions. Second priority is returning cash to shareholders through repurchases and dividends.
2:05: HP is increasing its dividend 50% to $0.12 per share quarterly.
Expectations: will add $7 per non-GAAP earnings by 2014.
2:08: OK, Leo Apotheker will now be taking questions from press for about 35 to 40 minutes.
2:10: Is HP going to open an app store for business apps?
A: Yes, it will be an open marketplace — not just HP apps.
Q: Will you be competing with partners?
A. Not really — it’s an open marketplace.
Q. What about your plan for WebOS, how will that affect your desktop business and relationship with Microsoft.
A. WebOS is “Unbelievably attractive and innovative technology.” Connectivity, seamless connectivity to one another, make it an outstanding Web operating system.
We will ship first on dedicated devices — smartphones and tablets. The TouchPad is out in June. There will be a version of WebOS running in browser on PCs by end of years. WebOS will be on Windows PCs starting from that point onwards. We’ll put same technology on printers, PCs, TouchPads, smartphones. Microsoft is a great partner, the way we’ve done WebOS will let us leverage Microsoft apps.
Q. What’s the difference between the cloud platform and the app store?
A. The marketplace is in the cloud. We’re building infrastructure as a service, apps, and a marketplace for those apps. Gives WebOS a huge advantage, because it assumes you’re connected all the time.
Q. Should we think of platform as a service for software developers? Or end users?
A. It’s for developers to create apps — test, run, deploy all through cloud environment. Developers can deploy to consumer, small business, or enterprise. If developers want to create for small businesses in specific geographies, can do that.
Q. You’re encouraging developers, but what does that mean for your solution business?
A. We’ll be good partners with all of our existing partners, be it Microsoft or anybody else. We want to make sure our joint customers get best service. Enterprise services even more strategic in the future, will help customers move from where they are today to where they need to be.
In the open environment, will be HP software and non HP software. We can’t create all of this innovation ourselves. Take ERP — I happen to know something — it would be totally pointless for HP to reinvent ERP. We’d be more than happy to partner with ERP vendor to deliver through our cloud.
Q. You said you’d avoid apps and focus on infrastructure in the cloud. How do you grow then from 2.9% of your revenue?
A. Analytics is one area. Security — building out our stack there. Probably the most important application anyone can create in the connected world.
Q. What about consumer security? How will that work with WebOS?
A. Need to take security from device back to back-end. Entire stack will be secure.
CFO Cathie Lesjak: Prosumer — people blend their consumer and enterprise life.
Q. You have formidable competitors in public cloud like Amazon, Rackspace, and Microsoft. How much are you putting into data centres?
A. To be in the cloud must be large scale, multilingual, serve customers everywhere. I’ll leave it to you to figure out what that means in terms of where we put the computers.
Q. Can you talk about the events in Japan and how they might affect your business.
A. First, our hearts and empathy go out to Japan. We are a significant player there, I was just there a week ago. All of our people are safe, our infrastructure has not been really touched, we’re almost back to business as normal.
Q. A Japanese reporter notes that there are rolling blackouts in Tokyo right now.
A. Yes, but our infrastructure is OK. No permanent damage. And all our people are safe. We can deliver needed services. HP Foundation is donating, we’ll match every dollar contributed by HP employees. We have a crisis centre as well, war rooms to help our customers as well.
Q. On the Microsoft relationship. Is your cloud going to be based on Windows Azure? Will you ship tablets with Windows 7 and 8,.
A. Technology for our cloud infrastructure will be based on a number of technologies, we’re not going into that now. Relationship with Microsoft is strong and will continue to be. We work very closely together. Our WebOS technology seamless when working with Microsoft’s Windows. We will be shipping Windows PCs that contain WebOS.
Tablets, we’ll ship both WebOS and Windows tables. “We just need the right version of Windows to do that.”
Q. In analytics, you’re playing catchup with IBM. And you’re behind in cloud. How do you do that?
A. I disagree, we’re not playing catchup. I don’t believe anybody has a really good real-time analytics service. These analytics will be delivered by industry vertical. You can’t just think of analytics in large enterprises, also small and midsize businesses.
Cloud: HP has been in the cloud business for years. Probably do already billions of cloud. The vast majority of cloud infrastructure runs on HP. We don’t need to catch up.
Q. You talk about “open cloud.”: What other OSs than WebOS and Windows will you be embracing?
A. it’s not just about devices, it’s about underlying technology as well. (He doesn’t answer the question.)
Q. You said HP won’t invest in all software. What are you not investing in?
A. Only software that pulls it all together. It’s not about old software stack. New stack.
Q. What will WebOS on PCs do for the customer experience?
A. It’s a world-class user experience. Intuitive, easy to learn, get it instantaneously, multitasking perfectly well, devices know they’re all talking to each other, seamless experience. Take a look at what we’re doing with TouchPad and Palm smartphones so far.
Q. Are you changing internal structures and people?
A. No comment. We’re here to talk about strategy.
Q. There’s been a huge rupture between HP and Oracle, but a lot of solutions work with both companies. What are you going to do to repair that relationship?
A. Our industry is characterised by “coopetition.” We’re in that situation with Oracle. What really matters is the customer, we will do whatever we need to do to keep joint customers happy.
Q. Talk more about what you’re doing with security.
A. Doesn’t work to provide a particular point of security, need end to end solution to secure entire stack, information flow. Can’t just control entry, need context of what users are trying to do. Analytics helps.
Q. What about this strategy is new? You’ve been doing a lot of these things already. Also, cloud is very expensive — Amazon and Microsoft already had big data centres, what are you doing?
A. I don’t know if our strategy is new or old, but trying to put all elements of what we’re doing together.
Point number two, a few new things today. We weren’t in platform as a service until today.
Third, we’ll start to expose intellectual property as intellectual property — we used to bury it, now exposing it making it into business.
Scale of capital investment to be a cloud provider. HP has already invested quite a lot. We already have data centres, we just need to fit purpose for the cloud. Some of the companies you mentioned use HP technology backbone. We have infrastructure and network capability, we’ll add some software over time.
Q. How are sales of hardware vs competitors?
A. HP is world’s largest provider of PCs of any type — desktops, notebooks, netbooks. HP happens to be largest provider of printers — laser, inkjet, personal. Scale unmatched. Just announced new devices, TouchPad and smartphones, not comparing with anybody. “We don’t intend to play in the junior league.”
Q. Amazon Web Services intends to be a $10B business in five years. How do you catch up? Can you give more details?
A. We’ll catch up and then you can ask me again.
Q. But a lot of software work has to be done. You haven’t talked about this in teh past. Any dates when platform and infrastructure might be done?
A. Launching infrastructure service as we speak, platform services are being added in 2011 and 2012. Necessary components will come from our own labs, partners, and acquisitions — all. How we’ll catch up is “pretty damn simple.” Scale. 25,000 enterprise salespeople. Lot of demand from enterprise customers who want this service today. They want SLAs, they want security, capabilities that scale worldwide globally, aren’t many companies that can provide that globally. In fact, there are none.
Q. When do we see the HP app store?
A. 2011 or 2012.
That’s a wrap.
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