If yesterday’s poor Q3 figures took the wind out of Meg Whitman and HP’s sails, you wouldn't know it. In fact, according to reports, HP is back in the acquisition market, but won’t touch anything with a price tag over US$ 1.5 billion.
Whitman's Changing Strategy?
If this leaves you a bit puzzled, then her statement that she would also consider deals of between US$ 100 million and US$ 300 million should really leave you wondering -- after all, what does HP need that only costs US$ 100 million?
Her statements, which were caught on CNBC business channel and reported by Reuters news wire, went on to say that Whitman has her eye set on a number of specific targets, or target areas, but didn’t elaborate what exactly she has in mind.
She is also reported to have said that “acquisitions [are] part of [HP’s] future and that the acquisitions would be used to shore “some of the product holes” that exist in the company at the moment.
"We don't need a five or six billion dollar acquisition. I think there are acquisitions in the $100 million, $300 million range, maybe some up to 1 to $1.5 billion that we might be interested in,” she said.
She also ruled out the break-up of HP, or the selling of assets, something she talked about in the past.
Where Is HP Going?
Hang on a minute, you might be thinking, did she not speculate earlier this year about the possibility of selling off business elements that are not making the grade?
Well, yes she did. In fact, she was so clear on this that it appeared in SEC filing in January. The filing, you may recall read:
We also continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives… the impact of the divestiture on our revenue growth may be larger than projected.”
That was 8 months and several quarterly financial results ago, and it’s possible that the evaluation is complete and there will be no sell-off of business assets.
But no one has mentioned this let alone thought to publicize it. You might have thought that this would have been clarified in one of the sets of poor financial results that appeared in the meantime.
Does HP Have A Strategy?
There is another issue that Meg Whitman needs to clarify, and the interview with CNBC would have been a good place to do it.
Again, going back a number of months, she said that the HP turnaround would be built on many things, but that one of the big elements would be innovation.
In fact at HP Discover in December she was quite specific about this, adding that IT innovation, Autonomy, big data and infrastructure would all be part of the turnaround.
The impression, though, was that it would be innovation from within HP using the talent that is already present in the company. There was no mention of acquisitions. But then in the aftermath of the Autonomy deal, using the words ‘buy’ or ‘acquisition’ was probably as socially acceptable as using any other four-letter expletive.
HP’s tentative move back into the acquisition space is a good one. It is good for HP as there are clearly IT areas that need work -- the recent Enterprise Group results bear witness to that. It is also probably good for the market generally in that it creates movement and movement brings change and innovation.
It is also a good thing that HP is shying away from the excessive deals of the ‘noughties’ when it shelved out nearly US$ 12 billion for Autonomy, or US$ 14 billion for EDS in 2008, which ultimately resulted in a massive US$ 8 billion write-down in Q2.
There were other big deal too, like that of smartphone maker Palm, which ultimately led to nothing, and Arc Sight, or 3Par. The point is that these kind of deals, at least for the moment, are a thing of the past.
And Whitman herself knows this. During the earnings conference call for the Q3 figures she said that from here on in HP would be incredibly measured and disciplined.
We will be incredibly measured and disciplined. We are very mindful of the event that we just came off with Autonomy, so don't worry about that…As we see these big tectonic plate shifts, there's no question that acquisitions are going to have to be a part of how we turn this Company around,” she said.
More Srategy, Please!
Sometimes you forget that Meg Whitman has been in the job since September 2011. Since then, she predicted that 2012 would be a sluggish year, and she was right. Then she said 2013 wouldn't be a good year, and she was right on that too. Yesterday, she said 2014 won't see the long-awaited turn-around, and on current form that looks to be the case.
It is impossible to see where the problem lies, although it should be noted that some of the other really big tech companies are doing considerably better than HP, so the economy cannot be entirely to blame.
Where lies the problem? There is a sense that maybe HP needs to outline, or even develop, a strategy with key milestones clearly defined by clear technology and business goals. At the moment, though, it really appears to be reacting to external factors rather than shaping its self-defined future.
For the moment, more on strategy and less on acquisitions -- unless, of course, they feed into that strategy. The shareholders are watching!
Image Courtesy of Cartoonresource (Shutterstock)