Is 'activestor' Icahn circling sickly HP?

Active investor Carl Icahn – who has done more than his fair share of shaking up companies that he believes are not run properly – is rumored to be mulling a stake in HP. Hopefully not through its heart. Icahn may or may not be interested in grabbing a big piece of the venerable IT gear maker, and if he were, he certainly …

[Jim O'Reilly]

When hi-tech is run like a corn-flakes company

A perceptive article! HP, and Microsoft and Dell are all suffering from executive and organizational bloat, and are demonstrating that well known industry truism that more is often less. Companies have a lifecycle, where they go from lean, motivated start-ups to whale-sized dinosaurs who can't achieve much, including profit growth.

The problem usually occurs when the ''Senior VP" layer is added. This is when a large bureaucracy is needed to support the new chiefs. These fiefdoms then spend most of their time fighting each other for turf, losing all sight of what made them interesting. The result is a stifling "Excellence by Process" attitude that achieves by grinding everything for a long time and then needing 30 executive signatures to accept the color of the 'Start" button.

Decentralization and removal of upper-layer bloat is the only real hope HP has. Maybe an asset-stripper is just what they need, though delicate surgery rather than blunt knives might be more appropriate.

[Captain Underpants]

Re: When hi-tech is run like a corn-flakes company

@Jim:

I agree with the majority of your comment, though I do think that a substantial part of the problem that large companies have in capitalist economic models is the idea that profit growth is perpetually possible. Growth is only one of several factors that should be used to evaluate a company's performance, and beyond a certain size/turnover/profit expecting consistent growth as a % of last year's profit becomes silly.

[Anonymous Coward]

Re: When hi-tech is run like a corn-flakes company

I think Captain's comment is dead on. There is this ridiculous notion that companies can, and should, grow profitably forever, increasing EPS, profits, revenue by around 10% every year in perpetuity to be successful. If you can do some simple compounding math, you will find that a company of HP's size that met those financial goals would have to take over the industry within a decade and sell more products than customers have spend. At some point, companies saturate their markets and hit a ceiling of the revenue and profit their business model can provide. When this happens, as happened to HP, companies, or executives more specifically, start taking desperate gambles (Autonomy, EDS, Palm, cutting everything in sight, etc) in order to achieve the growth and profits that analysts tell them to provide. There are some companies who can thread that needle, but no company can just grow endlessly year after year after year. Eventually companies are going to understand that making $100 billion and $7 billion in profits, as HP did prior to all of these debacles, with growth at about the rate of inflation isn't the worst thing in the world. A more sustainable approach would have better long run results.

[The Godfather]

Re: When hi-tech is run like a corn-flakes company

The art, as ever, is the ability to note change and be willing to adapt, do things differently and even move into areas previously alien to you. Your ultimate goal is to progress but through delivering value to your clients, employees and shareholders irrespective of fluctuations in revenue/profitability goals. Alas, as a publicly listed giant or behemoth such rational movements are anathema and this is where the crux of the matter lies. HP should be either be broken up, taken private or be run by people with an eye on what's coming and not what has been. It's fate, otherwise, is uncertain.

[DanceMan]

@ Captain & AC

I agree with both of you. Our economies and our corporations are wedded to the concept of perpetual 3% or greater growth, on a finite planet. The perpetual 3% growth is based on a perpetual population growth, again on a finite planet. It's madness.

Won't anyone think of the (too many) children!

[jr424242]

Painfully naive

"A 51 per cent stake would run just under $14bn"

A shamefully stupid bit of analysis, that. Market cap is predicated on the current market conditions, but the article hypothesizes a radically changed market by imagining a take-over. Do you think you could, say, buy half of the gasoline in the US at the currently price? In other words, if we cut the supply by half, the price would be unchanged?

[Destroy All Monsters]

Re: Painfully naive

I guess what would happen is that someone takes out an addy saying "I will buy your shares for current market value + 1 USD and the deal goes through if I can collect x% in total. Phone number is yadda yadda.". He wouldn't phone his broker to attempt to hoover up shares openly.

[Anonymous Coward]

Re: Painfully naive

True in theory, but if Icahn is buying a stake in the company, he is not going to announce it (probably really upset that this leaked if it is true) and buy $14 billion in one order on one day. He would buy a block of shares every day for months and months at undetectable levels through many intermediaries.

[Destroy All Monsters]

Re: Dig at open source

> Globalisation has hurt the west.

I don't think so. Wonder how many of your gear would still be in the unaffordable stratosphere (if it even existed?) What has hurt "The West" is pretending that they are wealthy and extremely progressive. And wars. Lots of wars.

[Destroy All Monsters]

Re: Dig at open source

Wild downvotes appear! Do you choose to fight or run away!

[Anonymous Coward]

Re: Dig at open source

Doesn't hold water, the entire IT industry is a counterpoint to your "open source benefits IT companies" point. Yes, Linux may save companies some development costs, but that is a small benefit for losing all of their proprietary distribution rights. That is why there are patent wars everywhere right now.

Sun open sourced Java, but the companies that made money on Java were IBM (WebSphere) and Oracle/BEA (WebLogic) using a proprietary model. That was the irony that kept coming up time and again. Java benefited Sun's competitors more than it ever benefited Sun.

The only companies that make money on Linux or open source of any other variety are companies that sell proprietary add-ons, software or hardware... but primarily software. The only company that is an exception to that rule is Red Hat and that is 1) because they own the Linux support market 2) because they try very deliberately to conceal their source code (e.g. masking patches so Oracle and SLES could not copy them and add them to their Linux distribution). It is all out there in the public domain, but they make it difficult for anyone to use it to compete with them. You might say to the letter but not to the spirit of "open source." Also, Red Hat makes a paltry amount of profit as compared to the Oracle, Microsoft type companies that do almost entirely proprietary.

IBM still makes AIX and hasn't moved away from it at all. They have the lion's share of the Unix market with AIX. IBM supporting Linux so heavily (and I agree that they really did carry the flag for Linux at the outset) was primarily because in late 90s, when they backed Linux heavily, Sun owned the Unix market and IBM was a distant third of three companies. They had little to lose in the Unix market at the time, which people forget because AIX more or less = Unix today. If you were IBM in the late 90s, Unix was the competition so it made sense to support Linux which undercut their competitors. IBM's Power systems, the hardware, just ended up being so superior that they, probably even somewhat to their own surprise, took over the Unix market.

If you want to make the argument that open source benefits consumers of IT, that is a different story. It doesn't benefit IT providers as much as it hurts them.

[Vic]

Re: Dig at open source

> they try very deliberately to conceal their source code

This is entirely untrue.

> (e.g. masking patches so Oracle and SLES could not copy them and add them to their Linux distribution)

RH does no such thing.

What it does is to ship *all* the patches to the kernel in one tarball so that, should Oracle want to benefit from RH's waork, it has to do some of its own homework.

But there is no "masking" of patches - they're all there, ready for Oracle, or you or I to take a look.

Vic.

[Anonymous Coward]

Re: Dig at open source

Read the next sentence after the one you quoted.

"because they try very deliberately to conceal their source code (e.g. masking patches so Oracle and SLES could not copy them and add them to their Linux distribution). It is all out there in the public domain, but they make it difficult for anyone to use it to compete with them. You might say to the letter but not to the spirit of "open source."

I think we are writing the same thing. Maybe you would prefer the term "obscure" instead of "mask" or "conceal", fair enough, but the point is the same. They release patches in one giant system upgrade instead of point by point releases specifically for the purpose of throwing Oracle and anyone else off the trail. They release everything to the general public, but they do it in such a way that it would be very difficult for anyone to use Linux code to compete with them or even collaborate in their patch process. Linux distros are already starting to fragment as a result, which will mean less ISV support and a smaller skill base for any one distro.

[Vic]

Re: Dig at open source

> Read the next sentence after the one you quoted.

Yeah, I read it. But I'd had quite enough of quoting nonsense as it was.

> but they make it difficult for anyone to use it to compete with them

No they don't. This is simply untrue.

> You might say to the letter but not to the spirit of "open source."

No, I wouldn't. I'd say it is both the letter and the spirit of Open Source.

> I think we are writing the same thing.

I think we are writing something entirely different. You keep mainitaining that RH are doing something nefarious, when in fact they are not. You keep saying they are obfuscating source, when in fact they are not.

> Maybe you would prefer the term "obscure" instead of "mask" or "conceal"

No, I wouldn't. I'd go for "publish".

There is no obscurement going on. There is no concealment. There is no masking. It exists only in the mutterings of ACs on various fora, and must therefore be considered FUD from "interested parties".

> They release patches in one giant system upgrade instead of point by point releases

No they don't.

They merely roll up all the patches for the *current kernel release*. You've still got the pristine upstream tarball, and you've still got a list of everything they did to make it into what was shipped. You've still got a detailed changelog.

The *only* thing that has been removed is RH's detail on which parts of the patchset comprise which parts of the changelog - and most of that information can be inferred from the changes between releases.

> They release everything to the general public

At last you have something right.

> they do it in such a way that it would be very difficult for anyone to use Linux code to compete with them

Nonsense. It is *trivial* to compete with RH - you don't even need to understand the code, just rebuild it.

> Linux distros are already starting to fragment as a result

Ah, the "fragment" keyword. I'm afraid you've just outed yourself.

Please stop spreading your FUD. I understand this might mean a reduction in income for you, but I'm sure you'll sleep better at night.

Vic.

[Anonymous Coward]

Re: Dig at open source

The RH CTO:

"We made the change, quite honestly, because we are absolutely making a set of steps that make it more difficult for competitors that wish to provide support services on top of Red Hat Enterprise Linux," Red Hat chief technology officer Brian Stevens tells The Register"

"We haven't at all restricted CentOS's ability to grab source code and recompile it and clean-out trademarks and package it. It's just some of the knowledge of the insides that we're hiding," he explains

http://www.channelregister.co.uk/2011/03/04/red_hat_twarts_oracle_and_novell_with_change_to_source_code_packaging/

[Vic]

Re: Dig at open source

> It's just some of the knowledge of the insides that we're hiding

...Which is entirely opposite to what you keep claiming.

RH are not mapping every single patch to its entry in the changelog ni the way they used to do. But they *are* supplying source in exactly the way they are aupposed to. There is no obfuscation. There is no concealment. There is simply source, together with an overview of the entire patchset, rather than a patch-by-patch analysis that you used to get.

Now please stop posting your FUD. It's not funny any more.

Vic.

[Anonymous Coward]

Re: Dig at open source

Read what I wrote. I acknowledged in the original post that they supply all of the source code to the general public and comply with the GPL. I never wrote that they were violating the GPL. I wrote that they were adhering to the letter, if not the spirit, of open source. They are more than pleased to release everything, provided that they are able to do it in a way, and increasingly so, that makes it difficult for third parties to compete with their support services.

Ok, "there is no concealment" but their CTO says they are intentionally "hidding of the insides" for the purpose of preveniting competition with their support services..... this open source hair splitting makes MS and Oracle look like straight shooters by comparison.

I really don't care. I am just pointing out that this is not the happy clappy open source world that some people make it out to be with universal sharing of resources and "competition" being some term for which the open source companies don't understand the meaning (i.e. they don't compete, they collaborate). RH wants SLES and Oracle out of what they perceive to be their business.

[Vic]

Re: Dig at open source

> Read what I wrote.

I read it. It gets no less inaccurate for repetition.

> I wrote that they were adhering to the letter, if not the spirit, of open source.

But they are adhering to both the letter and the spirit of open source. Muttering about not following the spirit is simply wrong.

> They are more than pleased to release everything

They are.

> provided that they are able to do it in a way, and increasingly so, that makes it

> difficult for third parties to compete with their support services.

And that much is nonsense.

You want to compete with RH? Go download their source, file the markings off it, and rebuild it. That's what I do. Competing is easy.

> Ok, "there is no concealment"

Correct. And that's where we came in - you claimed there was, I said there wasn't. That's all there is to it.

> this open source hair splitting makes MS and Oracle look like straight shooters by comparison.

Only when you spin it as if they were concealing their source. I'm glad to see you've stopped making that fallacious claim now.

> I really don't care.

Your repeated posting would tend to give the lie to that. Your persistent anonymity implies the possibliity of a reason for such.

> I am just pointing out that this is not the happy clappy open source world that some people make it out to be

Yes, we know what you're pointing out. But you rely on untruths and misrepresentation to make that point.

> RH wants SLES and Oracle out of what they perceive to be their business.

THat's patently untrue. RH just wanted Oracle to do the worlk for which they wre claiming credit. The way they went about this is probably a mistake - but that doesn't make it in any way contrary to the GPL, either in letter or in spirit.

Vic.

[Dick 3]

Death By Cash Cow

HP's current plight reminds me of my 1980 years in IBM,,, Big Iron,, 3270 Displays all hooked to the MainFrame. HP never ending flow of Inkjet Printers, all sucking up all the ink they could produce. Ahh the wonderful life of the 'Cash Cow' nirvana.

IBM was lucky enough to have a great Board at that time, and they canned the CEO and brought in Atilla the Hun.

Ruthlessly he cut and cut and divided and reoriented and went back and cut and cut and reoriented again,,,, finally out of the ashes,,,,, came the new true spirit and essence of the new company. It's an ongoing story,,, Gerstner did his job and Palmisano has done his and Ginni Rometty will do hers, Evolve as the world evolves.

[James Gibbons]

Computers were not the DNA of the early HP

Hewlett and Packard started out making scientific instruments. Their venture into computers was a buyout of a minicomputer company to supplement their calculator business and help run instruments. It gradually grew into a small business support product near the end of the 70's with small timesharing systems. Engineers and scientists loved the instruments and the computers were quite good for running experiments.

They trashed all that when they purchased Compaq to become the #1 PC maker and sold the instruments business. The innovation was lost and they turned into simply a PC and printer company with plenty of competition to worry about. They lack the DNA they once had and will never be the same.

[Anonymous Coward]

sadly true

I used to be a big admirer of HP's engineering approach (while it had one). Only time we had worries about HP kit in the old days was when the computer room airconditioning failed and ambient temps went up to 50 deg C*.

The engineering-first approach was first diluted, and then - I think - disposed of in the split that resulted in the instrument part of HP becoming a separate firm (Agilent?). Since the HP brand is now associated with shiny but crap laptops and rip-off consumables, maybe those bits of the company that are still guilty of sound engineering should be sold to Agilent and we can hold a funeral for HP.

* I'm glossing over the stange anomaly of the Buggedwriter printers that helped our users appreciate just how reliable everything else was (in those pre-Windows days), and ensured that HP's service engineers visited our site on a regular basis (several times a day, even).

** there must have been some part of HP that was engineer-driven as recently as 2008 - the HP 2133 netbook was a real blast from the past - beautifully engineered, but only 90 mins battery life.

[Anony]

The HP way

Oh how times at HP have changed from the HP way.... What a story that was....

As a Millennium grad at HP, i forever remember the reception at Amen Corner, Bracknell having Carly Fiorina's publicly available (google it) marketing photo hanging adjacent to the staff security glass turnstiles as you walked in. Black permanent marker pen anyone?....Compare this to HP Pinewood down the road where until its recent close you had a 70's hand painted portraint of Bill & Dave, defining the company's engineering roots.....How times changed. Did I mention i got a final written warning for uplifting HP list prices to maximise their minimum margin goals as I was instructed to do so by management? I left on my terms, not theirs, I never looked back. Good riddance i say. I love my Epson printer, Apple Tablet, blah blah blah, the list goes on.... Actually they used to make serious calculators back in the day..... Probably should re- hp invent the wheel.. Wait that was a Carly spun marketing blur..... ;-)

[Anonymous Coward]

Re: The HP way

I remember it well. And the Winnersh site when it was still HP. Good place to work which prided itself on the lack of hierarchy.

[Huckleberry Muckelroy]

I watched while HP got transformed from the most respected geekware manufacturer to a flogger of flossy consumer junk. Oh the heady days of breaking in a new HP Tone Generator and turning it into an AM transmitter. I pinned the decline on Carly Fiorini's egomaniacal mismanagement but machts nichts. If it went private back into the families' hands, it would make a great heroic tale full of kick-ass O-scopes.

[Martin Smith 1]

I agree with the idea of getting a leader with an engineering background back in charge. Too many folk running tech companies who would need help setting up a DSL modem, whose geek quotient is somewhere south of Pope Benedict's. German auto makers are mostly run by car nuts with an engineering qualification of some flavour. GM was run by mid-western sales types and bean counters for eons - lookit the shite they managed to crank out.

HP needs business savvy tech nerds, not side-parting MBA program clones. And yes, cast away that bloated VP layer.

[Stoneshop]

"Hopefully not through its heart."

Opinions on this differ.

[Anonymous Coward]

As an ex HP employee what amazed me was how Fiorina and subsequent CEOs didn't get the best from a supberb bunch of people. I remember when Bill and Dave stepped in whilst John Young was running the show because it got too bureaucratic and turned it round. What a waste of a great corporation! Now if HP could get its act together and become the supplier of good IT systems that acutally worked the way the customers hoped it would, just think how much money it could make.

[Raz]

I loved the HP quality...

But I will not forget how my first personal color printer was $5K. I have replaced it after 12 years with a $350 color printer, also from HP, which seems to be working well after 4 years, even if I don't print that much.

What I can't stand is their computers. Inexpensive, but poor quality.

[asdf]

Re: I loved the HP quality...

>What I can't stand is their computers. Inexpensive, but poor quality.

What the Tim Burton like advertising font doesn't divert your attention away from laptop keyboards and displays failing within weeks of the warranty ending? (if your lucky and didn't have to send in several times before)

[Raz]

Re: I loved the HP quality...

That's what I was saying. My wife's laptop is only 2 years old, but makes noise like a turbojet engine and exhausts about that much heat. The screen is working, I guess we are lucky, but the keys are faded.

[Anonymous Coward]

Wow, HP's market cap is only $24 billion?

HP's just plain got long-in-the-tooth. They make poor acquisitions, their products are commoditized and their services are not very distinguished. I'd like to agree with the people above, who say that spinning off Agilent took away the best part of the company, but Agilent is a dog these days as well, slowly getting consumed by software-based replacements for the instruments it makes.

[Anonymous Coward]

Icahn

I'm skirting propriety here, but if Icahn got cancer, I would not shed a tear. What of value has he ever built or produced? As opposed to Hewlett and Packard, for example?

[asdf]

Re: Icahn

Vulture capital unfortunately seems to be one of the few ways to keep corrupt management who appoint their buddies to the board on their toes. With all the rules imposed on and inherent dilution (own an S&P 500 fund, you are a (tiny) HP shareholder) of the middle classes mutual funds and pension funds its not like a large portion of the shareholders have a true say on what management does.