For anyone involved in the postproduction industry, the news this past week that HP would potentially sell off its computer division was a wake-up call. Sure, this is a fast changing industry and some at the company fear a future of ever diminished profits. But HP is a key player in the film and video industries. Now one of largest IT companies in the world, it also has a proud history of innovation that began in a humble one-car Palo Alto garage owned by Bill Hewlett and Dave Packard that in turn sparked the growth of Silicon Valley.
Just ask DreamWorks or any number of animation houses how important HP gear is to their work. That doesn’t touch on other companies doing CAD, architectural or car design, gas and oil exploration or anyone that edits or does compositing or special effects. The speculation that this innovative maker of quality PCs, servers and workstations would be sold off to the highest bidder–as some speculated–was unsettling, even in an industry known and celebrated for constant, destructive change.
There’s an interesting analysis of HP’s situation by Forbes magazine staff writer Quentin Hardy. The article makes its conclusions known upfront via its title-“HP: The Case For Incoherence”-with a first sentence that reads “You don’t see this much bad news in one place very often.”
The gist of the article, which details the losses incurred by the recent purchase of Palm, the turmoil in the PC industry (HP and Dell are said to make around a 7-percent profit margin on computers while Apple sails by with an estimated 30-percent margin), and the precarious future of the company’s important printer division all lead Hardy to conclude that “changing this company will cause a lot of turmoil and take a long time.”
As chance had it however, I was meeting with a group of HP upper managers and product specialists on tour in the city to present their 3rd major launch of new PC gear this year. “Our situation is no where near as dire as some make it out to be,” said Jim Christiensen, director of media relations of HP’s personal systems group.
“We have over $40 billion of revenue in the personal systems group, making us a Fortune 60 company” says Christiensen. “While our CEO has announced plans that will bring some significant changes, our group is going stronger than ever. Whatever happens, we’re still a very viable part of a $140 billion company. We’re in this business for our customers, and we won’t be letting them down.”
Indeed, September will see the launch of a range of new, innovative computer products at lower, more competitive price points. While I can’t yet go into detail, let’s just say the technology I saw and the calm, confident manner in which it was presented makes me think that HP’s computer division will be doing well no matter what happens.
HP’s innovation lives on: Here’s a PC Mag article that shows how the valuable WebOS ecosystem obtained from HP’s acquisition of Palm will turn up in PCs and other gear.
As long as we’re on subject of changes to one of the US tech industries star players, you might want to read a disturbing analysis of why the US is loosing out on the creation of the next generation of technology. Steve Denning, in a series of Forbes magazine articles that begins with “Why Amazon Can’t Make A Kindle In the USA,” faults—among other issues—traditional cost accounting, which focuses too much attention on increasing short-term profits by continually cutting costs even while this destroys the underlying strength of a technology company.
This inexorable logic is how whole industries disappear, says Denning. Instead we should correct short term thinking with, for example, approaches like “throughput accounting” that puts the emphasis on how companies can add new value, rather than just cut costs. Investors too need to change their thinking to “realize that short-term financial gains are ephemeral: the companies that will generate real value are those that do what is necessary to continuously innovate.” Apple and Amazon are two companies Denning gives credit to for their mantra of continuous innovation.
American tech companies dropping out of a market after creating innovative technology isn’t anything new, of course. Ampex is a good example. The California-based company perfected the audio tape recorder, invented the studio VTR, a portable videotape recorder, high-fidelity movie theater audio systems, multi-track audio recording and video editing. After all of these successes however, over the years Ampex divested itself of video and audio products for both the pro and consumer markets–“We’re just an engineering company” was their new tune. But they didn’t have that huge revenue engine anymore. Ampex finally made only tape recorders for storage–the Space Shuttle and the military were customers. But that wasn’t enough; it went into Chapter 11 in 2008. The Japanese bought a number of these patents and slowly, methodically built successful, worldwide consumer and professional industries from inventions we cast off.