Friday, September 23rd, 2011 - OVUM
OVUM COMMENT: Carter Lusher, Research Fellow

HP is flailing, causing more uncertainty and increasing the risk of doing business with it. As a consequence, CIOs should beware of the downsides of making major commitments to HP products and services.

It was widely reported on Wednesday that HP’s Board of Directors was meeting to decide whether or not to oust CEO Leo Apotheker. Regardless of whether or not the rumor is correct or not, the damage has already been done. This rumor and any actual action that the Board might make only reinforces that HP is a company that is in severe disarray. That the Board would be considering a change in CEO less that 10 months after Apotheker took over as CEO is a damning indictment of not just the new CEO, but also the Board itself.

These periods of turmoil at major vendors are never good for the company, the employees, and most especially the customers. The employees at HP are demoralized after thirteen years of severe cost cutting, layoffs, and drama so it is possible that key executives and staff are getting ready to leave or are mentally out the door. Other ways this turmoil impacts HP includes critical initiatives that stall, strategy and messaging change once more, and sales drop off as customers delay signing contracts. If Apotheker is fired then investors would start demand that the company be broken up to unlock the value of the components, leading to even more uncertainty.

The scenarios for HP and its customers range from poor to bad to worse. Ovum recommends that CIO and IT organizations assign a “risk premium” to dealing with HP demanding that HP respond with better discounts, pricing, or packaging. CIOs should also explore new terms and conditions that protect the company should HP be broken or experience major disruption to its business.

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OVUM COMMENT on HP: Carter Lusher, Research Fellow



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