HP, Yahoo: Two IT Giants on the Ropes but Hardly Knocked Out

 
 
By Chris Preimesberger  |  Posted 2012-05-18
 
 
 

HP, Yahoo: Two IT Giants on the Ropes but Hardly Knocked Out


Two long-established and respected IT companies appear to be, as they say in boxing, "on the ropes." Not the first time we've read something like this, and certainly not the last.

Hewlett-Packard, established in 1939, and Yahoo, born in 1994, are both at nadirs in their histories, looking at having to lay off large numbers of employees in efforts to keep their businesses looking financially decent for shareholders and customers.

Leadership is the main issue with both companies. Yahoo is searching for its seventh CEO since 2007 and already has told 2,000 of its 14,100 employees, or about 14 percent, they'll need to move on. HP is on its third CEO in two years and is now looking at laying off between 25,000 and 30,000 of its 349,600 employees, a reduction of about 8 percent of its workforce.

If HP does this, it will be one of the top 10 largest rounds of layoffs in the history of the IT business, according to outplacement firm Challenger Gray & Christmas.

Constantly Defending Themselves Against New Competition

Both companies are defending themselves against previously unheard-of global competition on all flanks. HP is being challenged in all the markets in which it see its future: servers, enterprise software, storage, networking, cloud computing goods and services,  personal devices--even printers and ink, two of the company's steadiest businesses for years. Oh yes, ink is a huge HP income producer.

HP also has made some bonehead business decisions in the last decade--we won't go into them all at this time--that have cost the company a lot of money and have elicited doubt among its shareholders, potential investors, and business partners. Smarter leadership will prevent that from happening again.

The same can be said about Yahoo. Yahoo is in a slightly more precarious position, because it competes in fewer markets and because the software goods and services business moves at the speed of the Internet, unlike anything hardware. It has to fight off every Tom, Dick and Harry Web service startup that comes along, whereas many of HP's competitors at least have to have physical offices and warehouses.

All companies worth their salt go through cycles. General Motors, General Electric, Xerox, IBM--you name it. Yes, even Apple, currently the richest and most successful company in the world. Why, less than two decades ago that company, too, was on the ropes and just that close to being knocked completely off its pedestal.

Apple Nearly Acquired in 1996

If it hadn't been for an Apple lawyer in 1996 who called Sun CEO Ed Zander the night before an announcement was to be made that Sun was going to buy Apple for $6 per share (sold for $540 on May 18), the world would be quite different. The iPhone, iPad, iTunes and many other products we take for granted today quite likely wouldn't have developed the way they did under different management.

History Shows People and Companies Can Turn on a Dime


 

The lawyer told Zander that there were still some legal complications and that the proposed deal couldn't be announced the next morning. Zander said OK, we'll wait.

As we all know, the deal never happened, its fired co-founder, Steve Jobs returned to the company after starting two other companies, and the rest is iHistory. Read eWEEK's account of this story here.

A lot of people have not heard this back story, and it makes an important point, because it illustrates what is possible in this business age. People and companies can turn on a dime, both for good and bad.

Look, we still print out a lot of documents and graphics every day. HP is the world's No. 1 printer maker. Its servers and storage arrays are installed in hundreds of thousands of data centers, and its products generally work very well. It has huge service and partnership organizations. You can go to HP and basically find anything you want for a data center or IT system of any size. HP is the closest thing to a one-stop IT shop there is--even more so, in some ways, than IBM.

Slumps Happen

HP is the largest IT company on the face of the earth in terms of products and income. It's not going away anytime soon. It's in a slump. Henry Aaron, Barry Bonds and Babe Ruth had plenty of slumps in their days, yet they also hit hundreds of home runs and won lots of games for their teams.

Yahoo has set numerous standards in the Internet age. It remains the world's No. 1 home page. Its Web mail is still the most-used in the world. Yahoo news, entertainment and finance news services are used by millions of people a day and, frankly, often taken for granted. Millions of people use Yahoo's free calendar and instant messaging services every day.

Once this company gets a visionary leader, it can still go wherever it wants to go. It remains squarely in the conversation; don't be fooled by naysayers who say its day has come and gone.

In the coming months, we'll have to see whether the venerable HP can make history "the HP Way" and if Yahoo! can create its own comeback and make History! in its own fashion.

Chris Preimesberger is eWEEK Editor of Features and Analysis. Twitter: @editingwhiz

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