In a 40-minute speech at an event in San Francisco yesterday, Hewlett-Packard CEO Leo Apotheker laid out his vision for the company's role in the new digital media universe. This was Mr. Apotheker's first public address since taking over the HP reins from Mark Hurd last November. It was his biggest opportunity to date to gain the confidence of the public and the investment community. This is important for him as HP's performance has already slipped under his command.
Unfortunately, I don't think the plan Mr. Apotheker described is going to be a winning strategy for HP. It seems the two major initiatives are:
- To build a comprehensive cloud-computing platform; and
- To create a comprehensive application marketplace.
Both of these are actually pretty good ideas -- but not for HP.
If HP is going to get into providing cloud storage and retrieval services, they are not going to be alone in that business. In fact, it is likely to become a commodity business, with several players providing similar storage capacity and retrieval speed. Competition in commodity businesses, where the products or services of the various suppliers are essentially fungible, generally boils down to pricing.
Historically, HP has not done well where price is the primary differentiating factor. HP has always been a high-end supplier of quality products (although in recent years, I'm less impressed by their computers). The only way HP could dominate the cloud business is with really superior technology.
If "superior technology" in the cloud business means a better user interface, HP will likely struggle to stand out. User interfaces aren't really their long suit either. They don't generally supply the "must have" software for any market. However, if they can use their superior technology to actually make cloud computing more seamless, secure and effective than any other company providing that service, and do it at a competitive price (not necessarily the lowest -- just competitive), they might do o.k. But o.k. won't be good enough; they need to dominate the sector in order to call the strategy a "win," and I don't think they will be able to do that.
With that said, I hope both businesses go really well for HP. I am very much a fan of the company, and I've always wanted to see it succeed -- even when Carly Fiorina was running it (although I was happy to see her go - she was simply not a good fit). I don't know that Leo Apotheker is of the same caliber as Mark Hurd, but I guess we'll find out. I'm a little dubious after yesterday's speech.