This Tech Giant Says Goodbye to a Rough Year
Dec 13th 2011 3:47PM
Updated Dec 13th 2011 4:06PM
On the scale of eventfulness, Hewlett-Packard's (NYS: HPQ) 2011 probably ranks top dog.
HP has had such a tumultuous year that has brought tears of joy and sadness alike (but mostly sadness) for shareholders and dramatic events fit for a midday soap opera. Shares closed out 2010 at $42.10, meaning that the stock is down roughly 35% year to date.
Crime and punishment
The year started off with HP still trying to find its balance in the wake of ex-CEO Mark Hurd's high-profile ouster a few short months prior. The story was filled to the brim with sex (harassment allegations), deception (these expense reports don't add up!), and betrayal (rival Oracle (NAS: ORCL) offers a place to stay).
In January, HP's board played musical chairs with four directors stepping down and five new ones heeding the call of duty (notably including eBay (NAS: EBAY) ex-CEO Meg Whitman, but more on that later), largely due to backlash from the plan to ax Hurd in a punishment that didn't quite fit the crime. By then, the reins had already been handed over to German software giant SAP ex-CEO Leo Apotheker.
Romeo and Juliet (Apotheker and webOS)
February saw the unveiling of HP's star-crossed TouchPad tablet and two smartphones, the Pre3 and Veer, all of which utilized the company's $1.2 billion acquisition of Palm and included webOS mobile operating system. The trio of mobile devices was the first to bear HP's brand (the Palm Pre 2 released in October 2010 didn't carry HP's name, even though HP owned Palm at that point).
It signaled HP's first real attempt to ambitiously step into the mobile hardware ring to tussle with the likes of Apple (NAS: AAPL) iOS gadgets and Google (NAS: GOOG) Android devices. The Wi-Fi TouchPad was officially launched on July 1 and daringly challenged the iPad to a direct confrontation at the entry price point of $499 for a 16 GB model, along with a $599 32 GB model.
Alas, it proved to be a brave but futile skirmish, as retailer Best Buy had trouble moving units and supposedly asked HP about its return policy within two months. Within days of that rumor surfacing, HP released third-quarter earnings accompanied with a major strategic shift. Apotheker had decided to divest its PC business in an IBM-esque move in order to focus on more profitable software and services.
Also getting canned was the webOS hardware division since sales were embarrassingly sluggish -- until HP cut the price tag to $99 to clear out inventory. Clear out it did, and HP proceeded to order another batch of TouchPads to unload, likely only to satisfy component supply contracts.
As much as Apotheker wanted to make things work with webOS, some things just aren't meant to be.
A tale of two CEOs
Apotheker's plan to transform HP didn't sit too well with shareholders and the board. It was his call to pick up British software shop Autonomy at a 64% premium in an all-cash transaction totaling more than $10 billion, roughly a fifth of HP's market cap at the time. Oracle CEO Larry Ellison also dropped an interesting tidbit that Autonomy had propositioned his company to acquire the British software maker, only to decline because of the "absurdly high" price.
Autonomy CEO Michael Lynch thoroughly denied the claim, saying HP was his top pick. Never averse to a good old-fashioned high-profile spat, Oracle proudly presented the PowerPoint slides that Autonomy and its investment bankers used when making their pitch. Oracle even went as far as using official press releases to document the bickering.
HP's board came to the conclusion that Apotheker wasn't their man, and maybe, just maybe, they should have met him face-to-face before giving him the keys. Apotheker was out, riding his golden parachute back across the pond, and Meg Whitman is now in.
Whitman has a tall order to fill in restoring HP to its former glory, after more than a year of public ridicule, board criticism, and dubious strategic direction. The lack of a clear game plan has given Dell (NAS: DELL) opportunities to capitalize on HP's missteps in the important enterprise PC business. Whitman has nixed Apotheker's whole "getting rid of the biggest revenue generator" idea and is decidedly keeping the PC business.
The final plot twist of the year was that Whitman has decided to make webOS an open-source platform like Android. There's even a distinct possibility HP will get back into the tablet game, but smartphones are out for the count. Whitman has now reversed two of Apotheker's major strategic decisions.
For HP, 2011 has been a terrible year by practically every measure, particularly for investors. As much of a mindless beast that HP has become over the past year, there may be a glimpse of humanity still lurking underneath, as Whitman has a chance to refocus the iconic bellwether.
In order to do that, she'll need to convince shareholders that the board isn't as incompetent as they seem (even if they really are) and that she's a woman with a plan.
Add Hewlett-Packard to your watchlist to see if 2012 turns out any better. Just because HP is missing out on the mobile revolution doesn't mean you have to. Get access to this free report on one stock that will cash in big time on mobile.
At the time this article was published Fool contributor Evan Niu owns shares of Apple, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of International Business Machines, Best Buy, Apple, Oracle, and Google. Motley Fool newsletter services have recommended buying shares of Google, eBay, Apple, and Dell. Motley Fool newsletter services have recommended writing puts in eBay. Motley Fool newsletter services have recommended writing covered calls in Best Buy. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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