HP's Catastrophic Conference Call
Originally published on Aug. 26, 2011
We can only believe that Bill Hewlett and Dave Packard would be rolling over in their garage if they had heard HP CEO Leo Apotheker on last week's catastrophic conference call.
Shares of the technology giant took their biggest intraday shellacking in three decades last Friday, tumbling 20% after Apotheker issued forecasts that missed analysts' estimates and unveiled strategic changes that had Wall Street analysts scratching their heads.
In a bid to boost margins, Apotheker laid out a series of major maneuvers, including jettisoning the company's personal computer business, closing its tablet and smartphone hardware unit and acquiring the enterprise software provider
for about $10.3 billion.
Yes, Leo wants to follow
(IBM - Get Report)
lead in going from hardware to software. That much is obvious. How he plans to undo all the expensive acquisitions made by his predecessors? We have no idea.
All we can say is that Jerry Seinfeld's fictional, borderline-senile "Uncle Leo" made more sense than his highly compensated corporate namesake running HP.
On the call, Apotheker, who joined HP last November from
(SAP - Get Report)
after Mark Hurd was booted for still unexplained sexual harassment shenanigans, said he plans to discontinue the products that run WebOS software, the same line Hurd acquired just last year in the $1.2 billion purchase of Palm Inc.
Why the shift away from the WebOS hardware business? Well, Leo refused to talk to analysts about that. As for the software part, however, he did say that they are "looking at all of our strategic options."
Thanks for the update, Leo. That's very helpful. It's good to know you are looking at your own business. You needed a press conference for that?
Likewise, he said he plans to spin off, sell, or do something inexplicable with HP's Personal Systems Group, or PSG, which is essentially the Compaq Computer business purchased by former CEO Carly Fiorina in 2001 for $25 billion.
"So what the board and the management team have been working very diligently over the last period is to really look at all of our options and what the board has decided to do, together with the management team, is to look at all of the strategic options around PSG," said Leo.
Um, excuse us for asking Leo. But what on earth does that mean? And why are you saying it to a bunch of analysts who will crucify both you and your stock if you don't give them something of value to plug into their Excel valuation spreadsheets?
But while Leo still has not found what he is looking for in HP's old business lines, he certainly sees a savior in Autonomy. So much so that he is paying a mammoth 10 times sales and about 25 times earnings for the outfit.
But when asked on the call about Autonomy's organic growth rate, sans the numerous acquisitions it's made over the past few years, Leo would not talk about "any forward-looking growth rates."
That's hilarious. Leo is "looking" everywhere for ways to improve HP's fortunes except the one direction HP needs to move: Forward.