Conventional Wisdom Rebutted

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Our basic purpose is to create information products that accelerate the advancementof knowledge and improve the effectiveness of people and organizations.

-  Hewlett-Packard 1998 Annual Report

Despite nasty rumors and ridiculous perceptions to the contrary, in 1998 HP honored thewords in its corporate mission statement (found on the inside front cover of its currentannual report).  But unlike the past several years, HP didn't have an easy time ofit.  In fact, HP's management had a difficult time improving the effectiveness of its124600 employees and its myriad of organizations.  Yet, at the end of the day, HPstill came out 10% ahead on net revenue with $47 billion (47,061,000,000 to be exact).

Yes, HP's stock (a part of the Dow-Jones Industrial Index) was mired in the low end ofits trading range, while the NASDAQ and the rest of the tech sector took off like arocket.  That was likely due to HP's earning's performance which, quite frankly,sucked -- at least from Wall Street's perspective.  That's why "reducing therate of operating growth below the rate of net revenue growth remains a major focus of thecompany."  But given the nonsensical valuations (at this writing) of Internetstocks (most of which have posted nothing but losses), technology companies like HP can'tbe adequately assessed on a lack of earnings alone.

HP got knocked in an Octobber Business Week article for, among other things, alack of innovative products.  HP introduced 20 new products among its LaserJet,DeskJet and ScanJet technologies.  And let's throw in HP's new modular ink jetdelivery system, which will help save on those expensive ink cartridge replacements.  Also, HP's new CapShare information appliance, a device which let's you scandocuments to be sent via e-mail or fax, was also introduced (watch for my hands-on reviewin an upcoming issue).  I guess it depnds on your definition of innovative.

Former HP VP Rick Belluzzo (now at SGI) was qouted in the aforementioned BusinessWeek piece saying that "HP has tremendous potential ... but ther's somethingmissing."  Well, with computer activities accounting for 84% of its $47 billionrevenue, $4 billion in cash and a $3 billion R&D budget, it's not missing thatmuch.  The recent reorganization of HP's Computer Organization under AnneLivermore will help, but HP's constant internal restructuring and seeming lack ofstrategic focus has left something to be desired from within and without.

Perhaps it's just part of HP's transition to software from hardware.  Sure, HP isthe leading hardware platform for SAP apps, with more than 5,000 installations (running onHP-UX and Windows NT systems).  But, on the softer side of HP, consider HP OpenViewwith 120,000 installations.  Another plus HP, although not especially well know, isChangeEngine;  software that enables organizations to rewrite business rulesprocesses without rewriting applications.

Still, the negative waves of perceptions linger, when as recently as January,Ziff-Davis' Smart Reseller posted results from a Web site poll indicating that44% of respondents found HP no longer relevant.  And that only 56% thought HP wasready to rebound.  Although black-and-white answer surveys don't have any scientificvalidity, this one seems to reinforce the idea that HP, celebrating 60 years in businessthis year, is too old to rock and roll.  But I say, HP's too young to die.  Skeptics, take note.