We all know HP as a tech giant that has dominated the PC and laptop market for a long time. But is the brand declining now? If yes, then why? Let’s find out.
Once, HP was a leading manufacturer in everything related to desktops and laptops, from pre-builts PCs to gaming laptops, monitors, and printers. Your first laptop was probably an HP Pavilion or the phone HP iPAQ. HP helped to pave the way for many of the devices we carry around today. Nerds didn’t just praise them; their tech was also considered cool. In 2006 They collaborated with Jay-Z to promote the HP Pavilion. Back then, they were innovative & used to focus on gamers with their omen series rather than just pumping out enterprise machines.
Even though HP still holds the second position in top PC vendor market share worldwide, just after Lenovo. Their status is declining. So what went wrong? Will the king be able to hold on to its crown? Find out our thoughts on this in the following sections.
11% – that’s how much HP’s revenue fell down to 12.5 billion dollars at the end of April 2020. With their revenue, the company’s stock is also affected, and their customer base is also being diluted. Does it have anything to do with the split in 2015? Looking at the track record, after the split, the once 10th largest company in the US, stumbled down to 60 in ranking. Even before the 2015 split, Lenovo had overthrown HP and claimed the throne in 2012. According to Digitimes, even after 10 years, HP couldn’t overcome, not only that Apple is also forecasted to overtake HP’s position. On top of these, the company’s printing division is facing more problems than the other sectors, to the point where it’s going through an existential crisis. So, how is a company which has a demand for its computers still declining?
Supply Chain Issues
The pandemic hasn’t been kind to any tech company, and HP is no exception either. Besides the depressing 11% decline in overall sales, the company’s stock went down by 17%, going from 17.12 dollars to 16.12 dollars in 2020. Even with a demand for personal computers, since more people were working from home, the company saw 7% sales decrease to 8.3 billion dollars. Besides these, the top management warned that the printing side of things could go through devastating declines compared to the last quarter. More on that later.
Lack of Innovation
So, why are the second-largest PC manufacturers suffering to sell PCs? Primarily because of innovation. Customers always look for the next best thing, a new release with impressive specs or an old model refreshed with modern specs. For a long time, a criticism against HP was that it didn’t invest enough in R&D. Instead, the company was more focused on milking its cash cow products. While it’s understandable that a business will want to make the most out of its best sellers, that shouldn’t be at the cost of innovation.
In recent years, HP stopped focusing on consumer laptops. Their most popular releases were the HP Envy 13, Spectre x360 14, Omen 15, Elitebook x360, and so on. These were once the most beloved laptops. Not to mention the HP Omen series was loved by all gamers. Yet today, these laptops don’t get the love they deserve; instead, HP prefers business-grade laptops over these. People prefer gaming laptops from Asus, Razer, and others who are serving. This is the result of not putting innovation into these laptops. Asus brings out laptops with dual displays and whatnot, but we’re still yet to see something similar from the company. The lack of innovation on the consumer side is honestly an eye-sore. HP, as a tech giant, didn’t introduce the latest tech frequently enough. So for a company that has been built around innovation, the lack of it can be seen in the declining sales.
Then there’s the infamous Compaq acquisition. It seems like HP doesn’t have the best luck when splitting or merging with another company. Their Compaq acquisition was more or less criticized by most. The head of Dell, Michael Dell, dubbed it the dumbest deal of the decade. Also, Walter Hewitt, the co-founder’s son, believed that the idea of a merger was fundamentally flawed. He suggested that instead of mindless scaling, HP should focus more on what it does best, innovating.
When asked for a vote on whether the merger should take place or not, confused shareholders said yes. With 51.4% saying yes, the merger was completed. So, what did this merger cost HP? The answer is 25 billion dollars.
Ran Out of INK
With everything moving online, it’s only natural that HP’s ink tray is running dry, and the company is having a hard time refilling that. HP was reliant on its entire printing business as a stable source of revenue. More than printers, the printing supplies brought most of the revenues, especially ink cartridges. However, with global warming and businesses trying to be more eco-friendly, HP’s printer and printer supplies business are spiraling down. Also, with everyone working from home, the need for printers have substantially gone down, generating less revenue and going down a spiral.
In the second quarter of 2020, the printer business saw a 35% decline going from 839 million dollars to 548 million. Also compared their printing sector is performing worse than every other department. While printing revenue saw a 19% drop, personal systems saw only 7%.
In 1999, HP was in troubled water, and they hired Carly Fiona to help them to shore. Carly Fiona tried and did quite a bit but was ultimately rejected by the employees. Why do you ask?
She had a tendency to brag; on her introductory note, she didn’t fail to mention her 52-foot yacht, which went about in a chauffeured car. However, that wasn’t the biggest problem. Carly Fiona avoided having her lunch in the cafeteria. Instead, she had hers inside her office despite employees asking her to have lunch with them. This creates an invisible barrier between the managers and employees, which is never ideal for a company.
During her time, she laid off 30,000 employees with downsizing in mind. The worst part is that some staff were fired over the phone. While rapid downsizing and laying off employees is a problem, being so heartless about it adds another degree to the issue. Combining this rapid downsizing and creating a barrier between everyone harms morale and employees’ overall performance.
Another big issue that badly impacted HP’s reputation was the scandals held back in 2006. At that time, HP was facing an information leak from their private board meeting to reporters. So the chairman of the board Patricia Dunn consulting with other board members, hired an external private investigating team to find the culprit. Those investigators somehow managed to obtain the phone records of all board members and reporters, where board member George Keyworth was found guilty of leaking information to publications.
Adding to the scandal series, in 2010, then HP CEO Mark Hurd was accused of sexually harassing a contracted advisor Jodie Fisher. But later internal investigation found that he was not involved in any sexual harassment but rather was submitting false expense reports to hide his relationship with the same advisor.
And there was another scandal of HP, which was just a money burning. In 2010, HP bought a British software company, Autonomy, for 11.1 billion dollars as that time, the software had a greater margin than hardware. But after taking a tour of the company accounts, HP got to know that it was worth less than the amount HP paid. The company’s value was only 8.8 billion dollars only, whereas Autonomy tricked HP by doing some irregularities in numbers. This eventually hurt HP’s pocket in billions which can be a major reason for HP’s decline.
In 2015, the new CEO Meg Whitman spun off the 70 years old HP company in two parts. Here the Hewlett Packard Enterprise was allocated to take care of the software and services where the new part HP Inc. was designed to work core on hardwares.
The only reason behind this split was HP had so much in their bucket, so a split will allow them to focus on their individual expertise. But the decision resulted in a big fall from the position of 20th to a heart-grueling 61st. And the new company they introduced somehow managed to acquire the 59th position, which was also not too great.
It seems like HP made some unfortunate decisions that led to tragic outcomes from time to time. However, focusing on existing revenue sources without experimenting with new tech was surely the straw that broke the camel’s back. As a tech company, HP needs to focus on innovation to gain the position they have lost. Also, being overly reliant on printers and printing supplies is, without a doubt, a dumb idea. With global warming on the rise and customers’ preference for eco-friendly companies, HP needs to rely more on innovation than inks.
With the right person at the helm and focusing on innovation, HP might get back on the scene as a leader, or can they? Only time will tell.