"History is bunk" Aldous Huxley notes in Brave New World. By divesting itself of what chief executive Lewis Platt described this week as "our heritage", computer giant Hewlett-Packard seems to have ruefully accepted this lesson, as the 60 year old company split itself in two in a bid to restore its fortunes.
On Tuesday, HP said it would divest its testing, medical and chemical products businesses to form a new measurement company, as yet unnamed, that will represent $7.6 billion of HP's total revenue of $47.1 billion in fiscal 1998. Or, as Edward Barnholt, chief executive of the new company described it, "an eight billion dollar startup."
This leaves the bulk of the company, the computer and imaging businesses, to retain the Hewlett-Packard name and provide its business units with greater autonomy to operate in their respective markets.
Platt described it as an "exciting new chapter in HP's history", that would allow greater public accountability, freedom with capital and ability to make acquisitions. His hope: by doing this his company can compete more effectively with the competition that over the last two years has ground away at its markets and left it, as one analyst said, "stalled in a growth market."
"Our goal has been to preserve what's best about HP, while sharpening our strategic focus and aligning ourselves to aggressively pursue new business opportunities. We believe we have formulated a plan that will maximise HP's potential for growth, while building value for our shareholders, customers and employees," he told analysts on Tuesday evening.
Platt expects the restructure to be complete by around March next year. But while the split in two was considered radical by the standards of a traditional blue chip company, its not much compared to what still needs to be done, note analysts.
"I would describe it as very good start but no more," said Andy Butler, analyst at Gartner Group. "Within the organisation that's left there are still great variations in margins, go to market models and cultures that still have to be resolved."
Another analyst was more damning: "HP has been suffering from the three Bs - it is big, bloated and bureaucratic. This might be one step on the path to correction."
Peter Bradley, general manager of the UK branch of the HP computer users' association (HPCUA), said UK users agreed that HP had lost its way over the past two years - and argued Platt's departure was also necessary if HP is going to turn around its recent dip in performance
"People have got to feel with a ship that size that its under control from the top and it has not felt that way recently. The company has lost its way a bit since the death of Dave Packard. In a big company you need superb management skills and Lew Platt did not seem to have those," he said.
Even from a stock market point of view, the company needed something 'radical' - it is estimated that its share price has underformed compared to other technology stocks by 50 per cent over the past three years.
In December the company failed to ship a single K-class server, its key mid range server product that generates 60 per cent plus of its hardware revenue, because of production problems. Growth in its core businesses was around two per cent. Used to an overall revenue growth rate of 25 per cent plus every year since it was formed, it has recently dropped below that.
Martin Hingley, at analysts IDC, noted that Platt had always been concerned about the difficulties of getting high growth rates from a company with more than 100,000 employees. This split should drop it down below that level from the current 130,000.
"Smaller, focused companies have tended to do better - Dell's direct relationship marketing is a good example, or Compaq another - than the larger ones, completely outstripping [in their areas] Siemens and IBM who are full range suppliers," he said.
However there are positives, Hingley believes. On the hardware side, he said HP had a great idea with the 'five nines: five minutes' reliability program and a strong IA-64 strategy, which should help improve competitiveness over recent times.
"[Recently] HP's reputation has been somewhat tarnished for hot boxes and low end servers - Sun has had a better image the last few quarters for pure quality and performance of boxes," he said.
In January HP combined its services and computer units into the enterprise computing solutions organisation (ECSO), but it is believed it is going to further restructure its HP 9000 high end Unix business, with other reorganisations possible in the PC and printer businesses.
Last year the company began moving hundreds of marketing and administration staff into a more outward facing sales role. More of the same should be expected, said analysts.
Platt called in management consultants McKinsey at the end of last year to go through the company from top to bottom - this week's announcement is probably only the first of the recommendations to arise from that exercise. Other major changes may not take place until after a new chief executive is found however, which could take some months.
Bradley at the HPCUA is clear: "HP has to get it right and get it right quickly."
Butler suggested two further actions the company may be considering: spinning off the printer business to run autonomously; or following the IBM and Unisys models with its services organisation to extend it beyond what is essentially an HP platform business into the worlds of outsourcing and system integration.
HP also announced ambitious plans for jumping on the Internet bandwagon, admittedly after Sun and IBM, but at the beginning of what Platt describes as "Internet Chapter Two". It is planning to wrap new products and services under the banner of Eservices, hoping to benefit from the predicted trend where companies will buy applications like services over a reliable Internet.
"The new HP will have a rich menu of choices for growth and profits," claimed Platt.
But as the analysts point out, what users are waiting for is when the new HP will actually be revealed and how long it will take, because divesting itself of its history is just the first step.
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