The Decline of HP...What Happened?

[Music] hewlett-packard has been one of the most significant computer and overall technology companies ever but the company that exists today is much different than the one it used to be it gets tricky they've been involved in various spin-offs splits acquisitions to a point where it's hard to find objective figures that clearly support a decline in their business or really any kind of trend that's meaningful however some potential indicators would be the fact that they were added to the dow jones back in 1997 and dropped from it 15 years later it's a stock market thing the index typically wants stable companies that reflect the state of the market and it seems they no longer fit that criteria also they used to be the biggest maker of pcs in the world before lenovo passed them that same year and they've been struggling to keep up with them ever since then in 2015 the hp company that existed for over 70 years was split into two parts over the previous four years they had gone from the 10th largest in the us to the 20th largest in the us and this dropped them all the way down to 61 but it created a separate company called a hewlett packard enterprise that was the 59th largest the idea behind that split was generally that they had gotten too big they were doing too many different things and splitting up would allow each part to better focus on their own business hewlett packard enterprise would deal with the servers and various services for corporate clients whereas hp it would make the computers and printers and everything else for consumers i'm sure all of that together must demonstrate some kind of a decline but honestly i don't even think it's disputed most people would agree that hp has had some tough times i mean over the past few decades this has to be one of the most criticized companies you may even have complaints of your own so in this video i'm going to do my best to identify the biggest reasons behind that decline the name itself hewlett packard comes from the two founders bill hewlett and dave packard and it's the classic silicon valley story that you've heard so many times before they started the company out of their garage with 538 dollars in capital but what makes them so different is that they were among the first to do it that garage is now a landmark and considered to be the birthplace of silicon valley the two of them knew each other from being students at the nearby stanford university and they were encouraged by a professor of theirs named frederick turman to stay in the area and establish a business their first invention was an audio oscillator they used it to test sound equipment to try to sell it they made a brochure mailed it to potential customers and their big sale came when walt disney ordered eight of them it turns out that their movie fantasia was coming out soon so they bought those oscillators to help get the theaters ready to show it so that brings me to my first reason behind their decline and that is a lack of innovation because this company was built on innovation it started with that audio oscillator and continued strong for arguably the next 50 or 60 years i could get really sidetracked by this but just a few examples would be 1951 at the high speed frequency counter it was used to measure frequencies way quicker than you could before so radio stations would use it to maintain the right frequency or 1964 with their atomic clocks they were so accurate and portable that they were used to coordinate times all around the world in 1966 hp was the first to make commercially available leds in 1972 they made the first ever scientific handheld calculator intentionally created to fit inside of a shirt pocket it was called the hp 35 because it had 35 buttons that allowed you to do much more than the other pocket-sized calculators on the market that could only do basic arithmetic two years later the hp 65 was the first ever programmable one of that size and in 1981 they introduced their famous financial calculator then 1984 was printers they introduced the hp laserjet and think jet that was pretty much superior to the existing dot matrix printers in that they used less energy they were quieter and they resulted in better quality in 1994 it was the first ever printer fax machine and copier all in one i'm skipping over some big stuff that was a pretty selective overview but you get the idea here hp was able to grow over the years by introducing these revolutionary new products many of which completely replaced the old ones that were serving the same purpose however over the past few decades i don't think it's been quite the same they have been criticized for not spending enough money on research and development and overall just being more focused on their existing products rather than investing to create new ones that may seem a little abstract but computers are at the center of it i'm guessing most of the people watching this would associate hp with personal computers but that would not have been the case 30 or 40 years ago see they actually sold their first ever pcs in the 1980s but for more than a decade it was all very insignificant in 1992 they controlled only one percent of the market but then in 1995 they started their pavilion line priced at very low to aggressively attract some customers and by the end of that decade they were up to more than six percent in 1999 they spun off all of their segments that didn't involve computers and that was just the beginning which brings me to my second reason the compact acquisition now like a lot of this this is a debated issue some will say that this was the worst acquisition ever made while others will say that it was actually a pretty good move compact was the number one pc maker and in 2001 they merged together with hp in this monumental 25 billion deal probably the biggest effect of it is that it made hp even more reliant on pc sales by more than doubling their share of the markets it was even highly criticized at the time michael dell the head of a competing company called it the dumbest deal of the decade even the shareholder vote to decide whether or not they should do it passed with only 51.4 percent of the votes the co-founder son walter hewitt was very opposed to it and i think he expressed it well when he said the fundamental mistake and the thinking behind the merger was the perceived need to do something with scale instead of succeeding the way hp has in the past with focus and innovation the thing is that pcs tend to be more basic with lower margins so even though the merger did scale the business it has been argued that it made them less special and pushed them into a less innovative direction my next reason behind their decline would be the employee dissatisfaction and again this is straying away from what made them successful in the first place in 1940 after the first full year of business they gave a five dollar christmas bonus to all of their employees and soon after started a profit sharing program in 1942 they established a health insurance plan for their employees in 1957 when they first became a public company they started an employee stock option program that was available to all of their employees that had worked there for more than six months in the 1970s they were the first u.s company to offer flex time and in the 1990s they were among the first to encourage telecommuting hewlett and packard would personally interact with everyone and maintained a decentralized structure that gave the engineers a lot of power again there's a lot that could be said about this but they believe that employees at all levels were important to the company and keeping them happy would help creativity and just overall be good for the business now if you've worked for hp at any point please weigh in on this but it really seems like hp employees over the past few decades haven't been quite as happy with the company the thing that stands out to me is in 2005 they had a new ceo mark hurd whose big turnaround plan involved a lot of cost cutting that was not appreciated by their employees made some of their jobs more difficult impacted some of their salaries many of them were actually laid off i should say that the cost cutting did appear to help things overall in the short term but it could be argued that trimming things down like that moved them even further away from the days of their growth and innovation and then at the same time that ceo was accused of having an excessive salary himself so many of the employees felt that he didn't have their best interest in mind it's been similar issues with other leaders in general they haven't been displaying that same employee-focused mentality another thing that has likely hurt hp is all of these scandals oh my goodness they were really going through a bad streak there in 2006 hp was having an issue with information from their private board meetings leaking out to the media so the chairman of the board patricia dunn and seemingly others from hp hired an external private investigating team to try to figure out what was going on those investigators illegally obtained phone records from board members and reporters it led to these felony charges that were eventually dropped but she did leave the company as a result of it and actually died of cancer five years later another one would be in 2010 their ceo mark hurd was accused of sexually harassing a contracted advisor of his an internal investigation found that he did not violate their harassment policies but he did file inaccurate expense reports as part of his plan to cover up a relationship in the end he too ended up leaving the company as a result of the scandal then i even have another one in 2010 hp acquired a british software company called autonomy for 11.1 billion dollars at that point they had changed up their plan they were now trying to get more involved in software because it had higher margins than the hardware that they were selling well it turns out that there were accounting irregularities over at autonomy that wrongfully inflated their sales and made them seem more valuable than they actually were they essentially tricked hp into paying so much for them so the following year hp wrote down the value by 8.8 billion dollars meaning this acquisition lost them a lot of money obviously having all of these scandals was not good for hp aside from all the money that was directly lost it made the public perceive them in a more negative way and they were just overall distracting finally this one may be a little redundant but the leadership but we've been circling around it this entire time the company was led by either hewlett or packard all the way until 1978 but they remained involved in some way i believe almost until their deaths in 1996 and 2001 that's where all of these principles originated and for the most part the company continued following them but believe me when i say that pretty much every leader of hp since the 1990s has been very polarizing the ones that stand out to me would be carly fiorina she was the first ceo brought in from outside the company and was the driving force behind that compact acquisition again unclear if it was good or bad but it did change things up and the fact is that she was essentially fired from the position in 2005. then there's mark hurd obviously we've talked about with this controversial cost cutting strategy and then the scandal that led to him leaving the company and then there's meg whitman she was in charge when the company was broken into two parts unclear if that was beneficial and that goes along with other criticisms again it could be debated which moves were good or bad but i think the results show that at least as a group things have not gone well overall and even if you do happen to believe that all of these people were effective leaders just what about the fact that they've been changing so much the constantly shifting strategies and scenarios where the new leader starts by undoing what the previous one just did and not to mention all the money that was spent on severances and then of course you could look toward the board of directors for choosing these leaders and implementing so much change so there you have it i'll admit that there is a lot of speculation here it's one of those questions without any clear answers we're talking about stuff that's been debated for decades from inside and outside of the company my intention here has been to give a general overview of what's been happening here and to provide what i believe to be the biggest potential reasons for it that happen to be at the center of most of those debates let me know in the comments what do you think has been happening with hp why is this company been having so much trouble do you agree with the reasons i provided or do you think it has more to do with the quality of their computers or their marketing or something else also what do you think of the products from hp how do their computers or printers compare to the others and any other thoughts you have about hewlett packard leave them in the comments i'd like to hear what you have to say thank you for watching [Music]

Channel: Company Man

Views: 621,197

Keywords: HP, Hewlett-Packard, Computers, PC, Tech, Business

Id: ppqC0tNghSk

Length: 11min 53sec (713 seconds)

Published: Wed Apr 06 2022