Chapter 54 Section 2 Controversial life and death choices
There are roughly two reasons for HP's decline, the leader's mistakes and the impact of "Made in Japan/China".
In the 1990s, personal microcomputers became popular in the United States, and the entire market grew rapidly.Hewlett-Packard easily entered the microcomputer market by relying on its original minicomputer customer and market experience.Since its traditional users are small and medium-sized companies and schools, Hewlett-Packard opened up the microcomputer market of universities, research institutes and small and medium-sized companies without much effort.In fact, HP has quietly transformed from instrument manufacturing to the computer industry, and in 1989 and 1995 it bought two computer companies, Apollo and Convex, of course, it was only for the market of the two, and then the two The company's existing customers switched to HP's own minicomputers and workstations.By the mid-1990s, Hewlett-Packard had become a giant company integrating scientific instruments, medical instruments and computer products, and reached its peak with the rapid development of the US economy.At that time, Hewlett-Packard was the second largest manufacturer of computers and instruments in the world after IBM. Its product line was even longer than IBM, ranging from products as small as calculators and multimeters to the most complex civilian medical instruments. NMR machine.Computers were originally just one product in HP's long product line. It was only in the 1990s due to the development of the computer industry that the turnover of the computer department, including its peripherals, exceeded half of the entire HP, and it attracted special attention.
However, precisely because HP's product line is too long, HP's interior is very chaotic, and the burden of further development is heavy.Moreover, many of HP's products are irrelevant and cannot complement each other.Therefore, for future development, HP must adjust its products.In the 1990s, the simplest and most cost-effective way to adjust and reorganize a company was to separate some departments from the company and go public separately.HP chose this approach.The next question is which division to sell.
Generally speaking, companies will sell departments with low profit margins, useless to themselves, and poor prospects and buy companies that are helpful to the company's long-term development, such as IBM under the leadership of Gerstner.However, the next two largest splits and mergers and acquisitions in the history of HP's development went in the opposite direction, so the technology industry and Wall Street are still very controversial.Both transactions are related to former HP CEO Kelly Fiorina.People with hindsight were very skeptical of her ability to lead the company.In fact, the first company reorganization, which is about to spin off the instrument department (now Agilent) on which it started, was not decided by Fiorina, because the board of directors made the decision before she came to HP.But because it was implemented by Fiorina, many people put this account on her head.The second was the merger with the declining and loss-making Compaq Corporation, which Fiorina brokered over opposition, including from the Hewitts and the Packetts.Personally, I think the first spinoff of Agilent looks good now, because it turns out that Agilent is not doing well, but merging with Compaq is not necessary.
Let's go back to 1999 and take a look at the two splits and mergers that determined HP's fate. In 1999, HP's product line was divided into three directions: traditional scientific instruments, such as universal oscilloscopes; medical instruments, such as nuclear magnetic resonance; computers and their peripherals.We might as well take a look at HP's prospects in these three areas.
In the first field, HP has a technological advantage, and its competitors are mainly Japanese companies, which are catching up quickly, and Japanese products have an advantage in price.It's a stable space with stable margins, but the market is small, so it's a logical sell.The medical instrument industry is lucrative. Due to the high barriers to entry, it is difficult for new companies to enter, so the relative competition is not very fierce. The only real competitor of HP in the world is General Electric (GE). (In terms of nuclear magnetic resonance, the quality of German and Japanese companies is worse than that of American companies.) But the growth is not very fast, especially new technologies and equipment must be certified by the FDA before they can be produced and sold, so the development cycle is extremely long .Logically speaking, HP should keep this lucrative division, because the company has historically shed low-margin divisions and retained high-margin ones.However, the opponent of GE is not an ordinary opponent. For hundreds of years, it has been a rare evergreen tree in the world, and its nuclear magnetic resonance machine can never be surpassed by HP.So perhaps it wasn't a bad decision for HP to spin off its medical instruments division.Facts have proved that today's Agilent really can't catch up with GE's medical instrument division.
Finally, let's look at HP's position in the computing space.Hewlett-Packard Since the 1970s, Hewlett-Packard has successfully entered the computer market.The industry has grown rapidly over the past two decades, but competition is fierce and profit margins are low.In the computer field, HP has many competitors, from the early IBM and DEC to the later Sun and Dell.The technical and commercial barriers to entering this field are not high, and it is easy for new companies to squeeze in.For example, Apple and Dell quickly grew out of nothing and occupied a large territory in the field of computer hardware.Obviously, HP is betting on the speed of development of the computer industry, using the speed of development to make up for the loss in profit margins.However, HP may have overlooked the role of anti-Moore's theorem. A computer hardware company must develop beyond the speed stipulated by Moore's theorem to be meaningful, otherwise, profits will shrink day by day.Thus, the effectiveness of this gamble is still debated.
Another big bet HP is betting on is its printers.HP decided to adopt Gillette's business model—to make money from expensive blades with cheap knife holders, it planned to sell printers cheaply, and then sell ink cartridges expensively.HP's market strategists certainly did the math, but they underestimated the effect of Japanese manufacturing.So far, HP has been threatened by Epson and Canon in the printer market.
It should be said that although HP was big in 1999, it was not strong.This is a bit like the state of Chu in the Warring States period of China.HP's board of directors certainly wants to make HP strong.It has to decide which department to spin off and which to keep.Although the medical instrument department has a high profit margin, its development is limited under the pressure of GE. After a long period of deliberation, it was decided to separate the scientific instrument and medical instrument departments and establish a new company Agilent, and then the new HP can concentrate on computers. industry.Of course, such a large company reorganization must be carried out by an experienced person. The board of directors of Hewlett Packard took a fancy to Fiorina's experience in splitting and merging companies, and made an exception and chose her as the CEO of Hewlett-Packard, the oldest company in Silicon Valley, to implement it. Agilent listing matters.
In the first field, HP has a technological advantage, and its competitors are mainly Japanese companies, which are catching up quickly, and Japanese products have an advantage in price.It's a stable space with stable margins, but the market is small, so it's a logical sell.The medical instrument industry is lucrative. Due to the high barriers to entry, it is difficult for new companies to enter, so the relative competition is not very fierce. The only real competitor of HP in the world is General Electric (GE). (In terms of nuclear magnetic resonance, the quality of German and Japanese companies is worse than that of American companies.) But the growth is not very fast, especially new technologies and equipment must be certified by the FDA before they can be produced and sold, so the development cycle is extremely long .Logically speaking, HP should keep this lucrative division, because the company has historically shed low-margin divisions and retained high-margin ones.However, the opponent of GE is not an ordinary opponent. For hundreds of years, it has been a rare evergreen tree in the world, and its nuclear magnetic resonance machine can never be surpassed by HP.So perhaps it wasn't a bad decision for HP to spin off its medical instruments division.Facts have proved that today's Agilent really can't catch up with GE's medical instrument division.
Finally, let's look at HP's position in the computing space.Hewlett-Packard Since the 1970s, Hewlett-Packard has successfully entered the computer market.The industry has grown rapidly over the past two decades, but competition is fierce and profit margins are low.In the computer field, HP has many competitors, from the early IBM and DEC to the later Sun and Dell.The technical and commercial barriers to entering this field are not high, and it is easy for new companies to squeeze in.For example, Apple and Dell quickly grew out of nothing and occupied a large territory in the field of computer hardware.Obviously, HP is betting on the speed of development of the computer industry, using the speed of development to make up for the loss in profit margins.However, HP may have overlooked the role of anti-Moore's theorem. A computer hardware company must develop beyond the speed stipulated by Moore's theorem to be meaningful, otherwise, profits will shrink day by day.Thus, the effectiveness of this gamble is still debated.
Another big bet HP is betting on is its printers.HP decided to adopt Gillette's business model—to make money from expensive blades with cheap knife holders, it planned to sell printers cheaply, and then sell ink cartridges expensively.HP's market strategists certainly did the math, but they underestimated the effect of Japanese manufacturing.So far, HP has been threatened by Epson and Canon in the printer market.
It should be said that although HP was big in 1999, it was not strong.This is a bit like the state of Chu in the Warring States period of China.HP's board of directors certainly wants to make HP strong.It has to decide which department to spin off and which to keep.Although the medical instrument department has a high profit margin, its development is limited under the pressure of GE. After a long period of deliberation, it was decided to separate the scientific instrument and medical instrument departments and establish a new company Agilent, and then the new HP can concentrate on computers. industry.Of course, such a large company reorganization must be carried out by an experienced person. The board of directors of Hewlett Packard took a fancy to Fiorina's experience in splitting and merging companies, and made an exception and chose her as the CEO of Hewlett-Packard, the oldest company in Silicon Valley, to implement it. Agilent listing matters.