What do you get when you take a crappy company and cut it in two?

HP  is about to calve off its enterprise business and make itself into two companies. It held an analyst briefing today about the imminent process and there was not much good news there.

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Nothing would make me or most of Silicon Valley happier if this somehow turned into a fairy tale  ending. HP is an iconic company, perhaps the Valley’s first mega business. Its founder’s families are renowned philanthropists and Meg Whitman is a very talented executive navigating some treacherous waters in an old boat.

But there is just no chance for a happy ending. HP is a gigantic iceberg. The world’s fourth largest technology company at over $100B in revenues. But it has been shrinking for a long time.  You can argue all you want about execution, but if you are in crappy businesses, no amount of execution helps. If I were the Mckinsey-like consultant that was advising HP , I would have made them create four piles for their business.

  • Plle 1 – The great businesses. Those are businesses in growing markets and where we are the leader.
  • Pile 2 – The good businesses. Those businesses in growth markets where we are not yet the leader.
  • Pile 3: The crappy businesses. Businesses  in declining markets, but where we are the leader.
  • Pile 4 – The really crappy businesses. Businesses in declining markets where we are not the leader.

So here is why there can be no happy ending for HP, I don’t see any businesses that go in Pile 1 or Pile 2. They only have really, really crappy business and just plain crappy businesses.

Let take a quick recap:

The PC business . It’s a huge business for HP ( Thanks Carly) and they are a leader here. But we all know the PC market is declining, upgrade cycles are slowing and margins have always been a challenge in this business. The only people that made money on PC’s  were Gates and Balmer. And Michael Dell. Lets not forget him. Made lots. Very smart man.

Q3 Results: Personal Systems revenue was down 13% year over year with a 3.0% operating margin. Commercial revenue decreased 9% and Consumer revenue decreased 22%. Total units were down 11% with Notebooks units down 3% and Desktops units down 20%.

So let’s put this one in Pile 3 – Just Plain Crappy.

The Printer business.  Another huge business for HP. They are leaders in printers. And more importantly ink! I have an HP printer in my den that I bought 5 years ago. No need to upgrade it. I print a few things every month on that printer. I am carrying around a huge phone, a tablet and a ultra thin laptop, so why would I print anything. I can just show it on my device. And if people need a copy, then thats what Dropbox is for, isn’t it?

Q3 Results: Printing revenue was down 9% year over year with a 17.8% operating margin. Total hardware units were down 2% with Commercial hardware units down 6% and Consumer hardware units flat. Supplies revenue was down 6%.

Let’s put in pile 3 – Just Plain Crappy.

 

Enterprise Group: This has enterprise servers, storage and networking. Networking is actually a decent business, but HP is not the leader here. It could get a pile 2 rating. Even if you go cloud, you need networks,  sometimes even more networking, But HP is not the leader here.  Enterprise Servers are not a good business. People still need these, but with more workloads shifting to public clouds, this market is shrinking. Private cloud should be an opportunity, but with fewer buyers and better server utilization, you can expect to see further margin compression in a declining space. And Storage, if there was a Pile 5, it would be in that.  Hugely impacted by the cloud. This is a race to zero business. Declining market, declining prices, poor margins, need I say more.

Q3 results: Enterprise Group revenue was up 2% year over year with a 13.0% operating margin. Industry Standard Servers revenue was up 8%, Storage revenue was down 2%, Business Critical Systems revenue was down 21%, Networking revenue was up 22% and Technology Services revenue was down 9%

You could argue, this is the pile 3 business, but the overarching cloud trends are not good here. Pile 4.

Enterprise Services: HP bought the old EDS business. And when I say old, I mean Ross Perot old. (Admit it, when you read the name Ross Perot, you were tempted to go the Dead or Alive webiste, weren’t you? Let me save you the trouble, he is alive. 85 years old. Still kicking himself for that James Stockdale running mate choice.)

Tech consulting is still a growth business, but not the kind of consulting that HP does. Their expertise and business model is at least one generation old. But if you need some COBOL debugged they could handle that.

Q3 Results: Enterprise Services revenue was down 11% year over year with a 6.0% operating margin. Infrastructure Technology Outsourcing revenue was down 13%, and Application and Business Services revenue declined 7%.

Pile 4. Really, Really Crappy.

Enterprise Software. Unfortunately, this is almost all on premise software and most of it pretty old in the tooth. Acquisitions with the potential exception of Opsware have been weak to say the least. While Oracle has been making some nice cloud acquisitions, HP has been licking its wounds litigating with Mike Lynch. Enterprise software is getting eaten by the cloud. HP is only shrinking at about 6%, but look for increasing rates of decline in the near future.

Q3 Results: Software revenue was down 6% year over year with a 20.6% operating margin. License revenue was down 11%, support revenue was down 3%, professional services revenue was down 8% and software-as-a-service (SaaS) revenue was down 4%.

How could SaaS be down 4%? Must be really crappy SaaS.

Definitely, Pile 4 – Really, Really crappy.

So, there you have it. We would all like a happy ending here. But unfortunately only the investment banks will get one. They will make money in the split and then I suspect make some nice fees on the sales of the Enterprise business (to IBM?) and the Personal Group (to Lenova?)

Sorry. It s jungle out here.

 

SCOREBOARD and other reasons I like hiring College Athletes

I counted it up and over the last 30 years, I have hired over 1000 people to work in my organizations. I have learned many lessons. But let me just write about one of those lessons. Hiring college athletes especially those from team sports has been a home run for me. No, I am not talking about hiring “stereotypical dumb jocks or jockettes.” You have to have the mental horsepower to survive in tech. But I am talking about any smart high level athlete:  D1, D2, D3…they all work for me. Also the sport doesn’t really matter:  Football, Baseball, Basketball, Volleyball, Rowing, Water Polo, Rugby, Soccer, Track…it really doesn’t matter.  Why do college team athletes succeed so often in business? Its not what people mostly think. Yes, they are goal driven and often type A personalities….but in my experience that’s not why they succeed.  They succeed because they have three proven traits that I value a lot.

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Trait #1: They understand a SCOREBOARD!

Athletes “get” that there is ultimately only one measure of success. They  don’t try to make up their own metrics and call it success. They understand that moral victories don’t get you a trophy. SCOREBOARD! Do you have more points than the other team? That is what  matters. They also get that the SCOREBOARD has a CLOCK on it. They understand urgency. We need to have more points than the other team within a specific time period! Yes, we would all like more time and play for the longer term, but the scoreboard doesn’t allow for that. If you don’t have more points than the other team at the end of the allotted time, you get the “L”. Very simple, very clear, no ambiguity.

I am continuously amazed by how many people in business do not understand SCOREBOARD. They bring me beautiful powerpoints outlining products or projects with few success metrics and usually incredibly long “investment periods” before results can be achieved. Are you kidding me?!!! We are not starting a project without a freaking SCOREBOARD and we are certainly not starting a project without an agreement that we have a CLOCK on that SCOREBOARD. I have had very smart business people tell me that annual, quarterly or monthly targets and measurement are an impediment to long term thinking. I cannot count the number of times that a sales team has come to me and said “ We didn’t lose, but we can’t get the deal this month/quarter/year”. Really, thats like a football coach saying we didn’t lose , we just ran out of time. Here’s a newsflash, you LOST. Time has run out.  SCOREBOARD!

Another thing I love about SCOREBOARD oriented employees is that they are not afraid to admit they are losing. Why? They look at the SCOREBOARD! And if they are losing they will try to change something in order to win.

I am constantly amazed by business professionals running business units, products, projects who refuse to admit they are losing. I have sat through Quarterly Business Reviews where everyone is doing great. Nine out of ten slides in every  presentations trumpet their greatness, while one lowly slide is allotted to “challenges or lessons learned”.  Really?!!! How stupid do they think I am?  If every product, project, campaign was going great wouldn’t the scoreboard show that we are 200% of Plan!

An athlete understands SCOREBOARD and will tell me: “This is how we are doing on the original metrics. We are behind in these areas and we are making these changes. We understand that there is a limited time for success and we are acting with urgency”.

Trait #2. They can handle failure.

If they have been an athlete they have failed more than they have succeeded. They have lost, they have been injured and they have been cut. Hell, if they haven’t been cut, they would not be in my office looking for a job. They would be playing pro sports!

Business is predominantly about overcoming failure. Most product launches are not immediate hits, most marketing campaigns miss the mark, NPS scores usually start  low and a 33% win rate in sales is pretty damn common. Success in business comes most often through iteration, through the ability to learn and adapt and the ability to be persistent.

Athletes don’t have to learn this on the job. They have learned it already. You won’t have to pat them on the back and give them a participation medal. They will hate their failure and regroup.

Trait #3. They know how to play their position.

If they have played team sports, then they know that you cannot achieve your goal alone. They understand team dynamics. They have been on teams where they were the superstar and teams where they have been a role player. They understand that there are forwards and defenceman or backs and lineman. They understand that not only do they need to be excellent individually, but they have to be part of a system that works together. They understand that they can’t do everything themselves and they know how to be positive and encouraging with their teammates.

Business is the ultimate team sport. But I have spent a great deal of time officiating disputes between sales and marketing or customer service and product. I have met a great many sales people who think they are great marketers or vice versa. I have met many product people who don’t have team first attitudes. It kills me to listen to one department bitch about the other department. “Our salespeople could not find a dollar in bank vault” or “If our product team was in a 100 yard dash, we would use a calendar to time them”. If you have been an athlete, you have likely seen teams break apart because of bickering and you know that mutual respect, constructive feedback and setting guidelines on how we work together makes for a championship squad!

So there you have it. I am not saying that this is the only hiring profile or that every athlete has these traits, but I am saying it improves your odds. Go Team!

Why I Quit Android!

I have done it. I switched religions.  No, not the Catholicism thing….the Android thing. After SEVEN long years with Android, I bought a iPhone6 Plus on Monday, and turned in my Samsung Galaxy Note 4. I went right into the Verizon store and made the switch. I have been talking about it for a long time, but talking and doing are two very different things. But I did it. My legs were a little shaky walking out, but I made it to car without collapsing.

 

For those who know me, you know how big a decision this was. I have been an Android advocate since the beginning. I worked at Google when Android was born. I have owned approximately 10 Android Phones and probably trialed another twenty. I have used about 10 different types of Android tablets and 2 Android smartwatches. Hell, I even owned a Motorola based Android laptop device. I have been a committed member of the Church of Android and worshipped at the altar of Andy Rubin. I loudly trumpeted the Android gospel and extolled its benefits from the mountaintop. Not only that, I criticized and belittled the iPhone for its lack of customizability, its originally poor implementations of Google applications, its crappy maps and for its teeny, tiny size.

 

But I can stand it no more. Since the introduction of the iPhone6, I have been secretly harboring the desire to make the switch. But I couldn’t do it. Its not easy for a preacher to change churches. And this fall, I gave Android one more chance, I got new Samsung Galaxy Note 4 with a new version of Android and bought a Moto360 watch. It was a bad decision. A disaster in fact…so in a nutshell here is why I switched away from Android

 

The iPhone6 is a really great phone

  • It finally has the size I need in a phone. No more squinting at a tiny screen and a phablet that equals or betters Android.
  • The camera is just freaking great. Takes better pictures than any Android phone. SLO-MO video is unbelievable.
  • Best Apps Ecosystem in the world. Cutting edge apps come out first on iOS. Don’t believe me…how about Periscope and Meerkat?.
  • Fingerprint thing unlocks the phone quickly. Samsung fingerprint scanner is the definition of lame.

 

Samsung Phones are really starting to suck

  • TouchWiz is just a piece of garbage. Still lots of bugs. Widgets sometimes just disappear and apps sometimes just drop off the menu screens.
  • I was having tons of application crashes- Like 20 a day. This may not be all Android’s fault. I think application makers test their iOS apps more.
  • The camera is just not that good.
  • I was having serious battery problems after only 6 months with the phone.

 

The battle of the watches is not close

  • I had the Moto360. This has been widely rated as the best Android watch, but it is really not very good. The notifications vibration is barely noticeable and thats a problem.One of the main killer apps for a smartwatch is notifications. But if you miss the notifications, why not have a TIMEX.  Also, Google Fit is well…..as one review charitably put it: “it is not yet a finished product.”
  • The Apple Watch is not yet a perfect product, but it is a generation ahead of any Android watch. Notifications actually notify you and implementation is pretty elegant. Apple Health is pretty good and my step count is one tap away. You can actually use it for simple texting, not so with Moto360. Lastly, it just looks better.

 

I could not think of a reason to NOT switch

  • I used to stay on Android because the Google Apps like Gmail, Calendar, Hangouts, Google Now worked great on Android and were not very functional on iOS. Now only the imperfect Google Now is a differentiator.
  • I stayed on Android  because Google Maps with turn by turn direction and all the Maps goodies were only available on Android. Google Maps now available on iOS and Apple Maps catching up.
  • I stayed on Android because it had better form factor choices. Not anymore!
  • I stayed on Android because it was more customizable. And while that is still true…I don’t have all day to install custom launchers.

 

In the end I ran out of reasons to stay, I became upset with Samsung’s latest devices and frankly I started to envy the very iPhone users that I once pitied!

 

So….I switched religions. Better to switch than stubbornly stay with the Samsung/Andorid partnership that is currently struggling. I will keep you posted on how it goes and while I am now an iPhone person, I am keeping the Andy Rubin statue that I put in the Lock Koi pond.