Why has IBM remained sane while HP's gone nuts? One word: engineers.
When I arrived in Silicon Valley, in August 1985, HP loomed large—literally. My office was in Palo Alto Square, on the corner of El Camino Real and Page Mill Road. Across the street on another corner was a little building preserved as the original post-garage location of Hewlett-Packard. (It's gone now.) The next block up Page Mill was the sprawling headquarters for what Hewlett-Packard had become: the largest and most prestigious company in the whole valley and one of the most desirable places in the world for an engineer to work.
HP in those days was what people called a “Theory Y” company (en.wikipedia.org/wiki/Theory_X#Theory_Y): a place where work was as enjoyable as play. (“Theory X” referred to the more-common form.) Bill Hewlett and Dave Packard were both alive and active then, and “The HP Way” (www.hpalumni.org/hp_way.htm) still meant what it said: “trust and respect for individuals...high level of achievement and contribution...uncompromising integrity...teamwork...flexibility...innovation...” and so on.
In his autobiography, iWoz, Steve Wozniac calls the old HP “just the most perfect company”:
This was in January of 1973, and for an engineer like me, there was no better place to work in the world. Unlike a lot of technology companies, Hewlett-Packard wasn't totally run by marketing people. It really respected its engineers. And that made sense, because this was a company that had made engineering tools for years—meters, oscilloscopes, power supplies, testers of all types, even medical equipment. It made all the things engineers actually used, and it was a company driven by engineers on the inside so far as what engineers on the outside needed. Man I loved that.
The distinction between marketing people and engineers is the one between today's HP and the one that died along with its founders. You could see it in 1999, when the instrument business—the original heart and soul of HP—was spun off. The name for the new company was Aligent, which sounds like something you squirt up your nose so you won't sneeze. It still exists, but who cares? It's not HP.
Spinning off and anonymizing the soul of the company was the last thing most engineers inside HP would have done, for the simple and obvious reason that no engineers (or anybody) outside the company wanted it. The same was true when HP bought Compaq. Both moves were typical of “marketing people”, even as they violated the original function of marketing, which was finding and serving the true wants and needs of customers.
One could see the same disconnect—between marketing fantasy and engineering reality—in HP's purchase of Palm for $1.2 billion in April 2010, and its announced decision to kill what was left of Palm's old business in August 2011. That announcement came at the same time as the company also revealed that its entire PC division—including what it obtained from Compaq (for $25 billion in stock) in 2002—was for sale. (The marketing spin was “Evaluate Strategic Alternatives”: www.hp.com/hpinfo/newsroom/press/2011/110818xb.html.)
At that moment, HP still was the world's #1 PC vendor, with $40.1 billion in revenue and $2 billion in operating income for the most recent fiscal year (Wall Street Journal blogs.wsj.com/digits/2011/09/08/h-p's-pc-chief-hopes-for-speedy-spinout). It had a 17.5% market share, with shipments of 14,888,086 units in Q2 2011 (Gartner: www.gartner.com/it/page.jsp?id=1744216), ahead of Dell (12.5%), Lenovo (12.0%), Acer (10.9%), ASUS (5.2%) and Toshiba (5.2%). The more telling difference was in growth. HP's was 3.0%. Dell's was 3.3% and ASUS's was 3.7%, while Acer was down –20.4% and Toshiba was down –1.9%. The only bright spot was Lenovo, which had a whopping 22.5% growth rate.
And, who's surprised? Which would you rather have—a ThinkPad from Lenovo or a whatever-they're-called from one of those other guys? Even given Lenovo's faint-hearted support for Linux, ThinkPads are the least clone-like of all the “compatible” PC laptops. Meanwhile, HP's PCs have long been nearly anonymous but for the company logo they bear. Without that small bit of value, what's their distinction? The answer is none, which is why no other PC maker has bought the division. They already make no-name computers. So, by announcing the hunt for “strategic alternatives”, HP put a giant “GOING OUT OF BUSINESS! EVERYTHING MUST GO!” sign in its store window.
Predictably (to all other than HP, apparently), this wacky move has spooked the enterprise customers HP intends to serve with more products, services and devotion. Ray Barnard, chief information officer for Fluor Corp., told the Wall Street Journal that his company, which normally spends $25 million per year on hardware and software, has put on hold its plans to buy new high-end computers from HP, because “It appears they are lost right now” (online.wsj.com/article/SB10001424053111903895904576544822297017068.html). Frank Purdue, vice chancellor for information services at Purdue University Calumet, told the paper that he has to “reassess his tablet plans” and was unsure how to proceed on other fronts with HP. It's not even worth going into the circus around the death, rebirth, re-death and persistent purgatorial state of HP's Android-based TouchPad tablets.
The US National Library of Medicine (www.nlm.nih.gov) defines psychosis as “a loss of contact with reality, usually including false beliefs about what is taking place or who one is (delusions) and seeing or hearing things that aren't there (hallucinations)”. There is no better characterization of HP today, and for the last 12 years or more.
Back at the turn of the Millennium, when IBM announced its love affair with Linux, I wrote this in Linux Journal (www.linuxjournal.com/article/4339): “One of the things I observed about the IBM announcement, when they essentially declared themselves a Linux company, was that this was clearly a company that was now in full compliance with its own engineers.”
That's one more reason why the sale of IBM's PC division to Lenovo made sense, while HP's rejection of its PC division did not. IBM remains driven, to the degree it remains sane, by its engineers. HP lost its Way when Dave and Bill died.
