Dell and HP Face Direction, Leadership Questions

Quarterly earnings results are on tap later today from Dell and HP. While the two companies would never be confused for twins, they have much in common. Not only do they sell similar products into similar markets, serving similar types of customers in the process, but both are bedeviled by serious questions about direction and leadership.

At HP, of course, the strange circumstances surrounding the sudden departure of former CEO Mark Hurd continue to generate more questions than answers. The details and machinations behind Hurd’s ouster might never be known. That presents a problem for a public company, because shareholders don’t usually like the firms in which they invest to be enveloped in a fog of murk, mystery, and intrigue.

For HP, the game of Clue will have to end. Whatever Mr. Hurd might have done, and how and where he might have done it, will have to take a decisive back seat to issues pertaining to HP’s direction, focus, strategies, and tactics. Investors and market watchers will be looking for clear indications tonight, when the company conducts its conference call with analysts, that HP has a firm hand on the tiller and is heading in the right direction. Given what’s transpired in the last couple weeks, HP will have to place particular emphasis on candor and clarity in its communications this evening. The substance of the message is always important, but tone now is critical for HP, too.

Nobody is Indispensable

My own view is that CEOs are like quarterbacks on football teams. They tend to get too much credit for corporate successes and too much blame for setbacks. Honest CEOs who’ve enjoyed success will tell you that they’ve been surrounded by excellent teams that contribute to the plans and bring the execution to fruition. The business media, though, likes to personalize and simplify, so it tends to focus on the CEO as the apotheosis of corporate culture. That’s not really how or why technology companies are successful, but it makes for good copy. The truth is, nobody is indispensable.

On Cisco earnings calls recently, I’ve noticed that CEO John Chambers has been giving prominent credit to his bench strength, noting the contributions of specific executives who run various parts of the company.

As much as it might pain it to do so, HP should follow Cisco’s lead and correct the ridiculous media misconception that the company’s wheels will fall off now that Mark Hurd isn’t sitting at the front of the bus. Considering that too much Mark Hurd might well have been a bad prescription for what had begun to ail HP, I think HP should be confident in showing that it knows how to correct its course.

No More Frankentablets

As for Dell, leadership issues also are on the front burner. About a quarter of votes cast at Dell’s recent shareholder meeting withheld support for Michael Dell’s re-election to the company’s board. The company’s shares are down a staggering 50 percent from where they stood in August 2008, and Dell recently paid $100 million to settle a government probe into questionable accounting practices.

Alleged accounting shenanigans aside, I think the primary problem for Dell is one of focus. It tries to have the breadth of an HP, but it doesn’t have the resources to pull it off. LIke a lot of other market watchers, I’d like to see Dell show more solution focus and market discipline.

The company is going nowhere in consumer markets. The Streak, for example, looks like something hatched by a committee that couldn’t decide whether it wanted to devise a smartphone or a tablet. Consequently, it wound up producing a Frankentablet with a five-inch display.  I have a feeling it came as much from Dell’s ODM partners as from its own design labs.

I know it won’t happen on this call — certainly not with the current composition of Dell’s board of directors — but I’d like to see the company recognize, for once and for all, that it’s out of its depth in the consumer space. I’d like to see it turn its attention, focus, and resources to the SMB and enterprise markets, and to further enhancing its evolving virtualization and cloud strategies.

It won’t happen, but it should.


4 responses to “Dell and HP Face Direction, Leadership Questions

  1. Nice note and good suggestions for HPQ. Its not clear that Dell can afford to exit the consumer market. HP has stated previously that if you exit the PC business, you become less relevant in the server market as component costs tend to be higher for those vendors lacking scale. Clearly a tough spot for all involved.

  2. Thanks for the comment, JTC.

    I’m not sure I completely accept the argument that remaining in the volume PC market is a prerequisite for developing and delivering enterprise and data-center solutions. I understand the supply-chain considerations as they apply to PC volumes and economies of scale, but I think Dell must look in the mirror and ask itself what it wants to be when it grows up.

    If it is honest with itself, it will realize it can’t win in the consumer space, is squandering resources and opportunity cost in chasing that dream, and that it might have to reassess whether it has a sustainable future as a PC vendor. Yes, I know it seems like sacrilege, but Dell might have to turn its back on its heritage as a PC vendor.

    Indeed, it’s a tough spot. But the potential implications of not making a difficult transition appear worse.


  3. A leadership change would be a start. But, what do you think the next technology revolution will be and who will lead the charge? Apple, Dell or Cisco – even all of these strong players need to make a change to survive.

  4. Ryan,

    Change definitely is a constant for any vendor that wants to remain relevant, much less grow its business. As to who will lead the charge into what comes next, I’m not sure it’s a simple answer.

    Apple should remain a powerful presence in consumer markets, but the enterprise space — roiled now by the macroeconomic malaise, the push to emphasize relentless cost controls and reductions, and the rise of virtualization and cloud-based services — is up for grabs as never before. I suspect we’ll see some big changes there.


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