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3 Steps HP Should Take to Turn Itself Around

By Rob Enderle, CIO
November 30, 2012 09:35 AM ET

CIO - Generally, fixing any complex problem comes down to three steps: breaking the problem down into components, conducting triage and deciding which components to fix and which ones to get rid of and, finally, prioritizing these components and devoting resources to them.

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If you don't break the problem down and follow these steps, then you'll likely just deal with the symptoms of the problem but never actually fix it.

This is Hewlett-Packard's issue at the moment. It's the result of a multiple CEOs with different strategies trying to fix the company using different methods. What started as a simple problem-to make HP relevant and interesting again-has become a complex mess.

Now Meg Whitman has to fix this mess, and about every time it looks like she is making progress, another aspect of the firm has a catastrophe. The latest is the discovery that Autonomy, a large acquisition, was improperly valued inside HP because its financials at sale were inflated. Among other things, Autonomy was sold as a software company when much of its revenue allegedly came from hardware; services, in fact, sold at a loss.

Let's explore what it will take to turn HP around.

Breaking Down HP's Problem: Competing in Too Many Industries

Typically, a successful company is in one industry. HP is in at least four distinct industries and each is in a very different phase. Its printing division alone is in two distinct markets. There's consumer and business printing, which is an industry not only in decline but one in which third parties are successfully mining profits through ink cartridge refill programs. There's also industrial printing, which aligns with equipment which manufactures books, signs, coverings and magazines from semi-finished materials; traditional print is in decline, but the other aspects of industrial printing are nascent, so this market has significant growth potential.

The PC division, meanwhile, is in HP's consumer electronics business. This has been unsuccessful in the smartphone and tablet segments that are experiencing growth and exists largely on the value side of the legacy PC business. Simply put, it's underperforming the market leaders, who are Apple, Lenovo and Samsung.

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The remaining parts of the company focus on enterprise computing. Execution here is mixed, with hardware doing reasonably well but services and software struggling for different reasons. Fixing this division is also a complex problem. At the core, though, is that the apparent weakness of HP has virtually all competitors focused on mining HP's customer base. HP isn't competing against one of them, or even part of a pool. The company is overmatched trying to defend against all of them-and many are at a similar scale or even bigger than HP.

Triage: Get HP Out of PCs and Personal Printers

Of HP's four industries, two show upside potential against the company's existing resource base. The first, as noted, is industrial printing for coverings. The market is nascent, and HP's scale could allow it, with focus, to dominate. However, doing so would result in eliminating most of the company, which suggests that a better path might be to sell off the industrial printing business and use the money to strengthen the rest of HP.

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