Thursday, September 22, 2011

HP’s Paranoid Streak Resurfaces

Hewlett-Packard, goodbye.

Well, that’s an exaggeration, but I want to make sure I make the point: companies whose leadership is as dysfunctional as we are seeing at HP rarely survive for long.

HP, a few years ago, was so worried about what people might be saying to the press that it hired detectives to spy on its own employees and directors and the reporters who were writing about it. When details of this became public, the scandal gave the company little choice but to fire its CEO.

Roughly around the same time, also in Silicon Valley, another company, eBay, became convinced that its customers were out to get it. It launched investigations into a huge number of its best customers. Millions of users had their accounts frozen or were banned from the site. New users found it suddenly much harder to get started. EBay the company has more or less recovered from that episode, but eBay the web site has not. It went from being an iconic brand to being an Internet shopping destination that competes with Walmart.

And eBay’s CEO at that time is the new CEO at HP. That was HP’s big announcement after the close of the stock market this afternoon. It is the first real full-time job Meg Whitman has held since she was forced out at eBay.

This confluence of paranoid dysfunction could be just a coincidence, until you look at the circumstances surrounding Whitman’s appointment. The story as a whole has people in Silicon Valley and Wall Street alike scratching their heads in disbelief. Daily Ticker’s headline, “HP’s Implosion Continues: Hapless Board Prepares To Fire CEO, Hire Meg Whitman” might be more outspoken than most news outlets, but it’s positively restrained compared to what people are saying on Twitter.

It is a big risk that HP is taking, and that is putting it mildly. EBay had so many customers, it could scare millions of them away and survive. HP draws most of its revenue from a mere one thousand customers. If it loses even one big customer, layoffs follow. And HP, despite its leading position in the computer business, has competitors that are more than capable. If customers lose confidence in the company, they can disappear in the time it takes to make a phone call.

It is not too late for HP to pull itself together, but to do that, it needs to take a realistic look at where it is and what it is trying to do. Based on their track records, there is no reason to hope that either HP’s directors or its new CEO are capable of doing that.