Hewlett-Packard Covers Its Tracks in Autonomy Case

Now that Hewlett-Packard has finally put together its case against Autonomy, it’s time again to assess how paranoid Hewlett-Packard’s management is. Autonomy is the software company Hewlett-Packard overpaid for a few years ago, and after a subsequent management shakeup at Hewlett-Packard, the new managers made wild allegations of accounting fraud at its new subsidiary. A good long time has gone by, and Hewlett-Packard has now added numbers to its allegations, but there is still no evidence. The gist of the report is the assertion that Autonomy was not entitled to recognize revenue from products sold to value added resellers. However, there aren’t any accounting rules or computer industry conventions to support that assertion. It is just a rule that Hewlett-Packard made up because its case against Autonomy was so empty.

Corporations make wild allegations often enough, but the more worrying thing about the case was that it seemed to reinforce signs of a paranoid streak in the board and management at Hewlett-Packard. The good news is that there is little sign of that paranoia in this latest report. It appears more a defensive action, perhaps drawn up by lawyers hoping to deflect the investor lawsuits that may be forthcoming against Hewlett-Packard for its conduct in the case. The company promised to deliver a report, here it is, maybe the whole case can go away quietly now.

It is almost impossible for a company in retreat to look good, and Hewlett-Packard’s plan to imitate IBM’s approach doesn’t look so smart now that IBM itself is mired in cutbacks and layoffs. On the other side, its former core business of printers and laptops is so weak it is preparing to spin off that unit. We can be sure that a new turnaround plan will come out after that spinoff. It may not look pretty, but the company is still standing.

McDonald’s Failed Turnaround

The good news for McDonald’s is that it has a turnaround plan. The bad news is that the plan doesn’t make sense and will never get anywhere. Realizing that U.S. consumers have taken to avoiding McDonald’s, the burger chain is trying to bring former customers back in. Unfortunately it isn’t willing to do what needs to be done. The two keys to McDonald’s plan are:

• Cut costs
• A marketing campaign to improve the public perception of the quality of its food

The misgivings with this plan should be obvious. The two areas where McDonald’s falls flat on its face are the quality of food and quality of service. Cutting costs can’t possibly improve either. If you weren’t willing to stand in line for 30 minutes to get food that is a step down from the supermarket freezer, then why would you be willing to wait in line for 35 minutes to get food that is two steps down in quality? Meanwhile, if the forthcoming ad campaign succeeds in getting former customers to return, it will only hurt the chain’s reputation all over again. Imagine hearing that a restaurant sells “real food” now, only to go in and find out that the food is the same tawdry fare as before, but with a few more corners cut in the preparation to save money. Do you think you might respond by saying, “I will never come here again, and this time I mean it”?

Why can’t McDonald’s improve its wretched food? There are two reasons. First, it has invested billions of dollars in the factories that churn out this stuff. An investment on that scale can’t be retooled at the drop of a hat. Second, McDonald’s really honestly doesn’t understand what’s wrong with its food. McDonald’s executives know they don’t eat their own food more than they have to, but they haven’t stopped to think about why that is. When they talk about the nutritional value of their products, it’s in the language of 1970, the dark ages of nutrition when we had barely learned that vitamins and minerals existed. We now know that there is a nutritional difference between fresh food and processed food. It stands to reason when you think about it that there might be a difference between meat in its pure form and meat that’s been smashed to bits with the processed-food equivalent of an air hammer. McDonald’s is living in a time warp in which this difference doesn’t exist, but the vast majority of its potential customers are becoming more food-conscious and have learned that food is not all the same.

McDonald’s also says it will start listening to its customers again. If they follow through on this promise, the message that should come through loud and clear is, “I know there’s something wrong here, I just don’t quite know what it is.” McDonald’s customers tend to be at this stage, because once they figure out what’s going on, they become former customers. McDonald’s reaction on hearing this should be, “We’re a huge, well-funded corporation. We can find out what’s wrong, and we can fix it!”

Okay, that doesn’t sound likely, but I can dream, can’t I?

The Password Problem

We all spend too much time typing in passwords. If you shop and pay bills online, you may spend 10 minutes a day just signing in to one site after another. Maybe you keep your cell phone locked, so that you have to enter a passcode every time you turn it on. The situation is worse for corporate information workers, who also have to sign in to computers, databases, printers, voice mail, and internal applications for messaging, timekeeping, goals, and training. With the tighter security rules found in corporations that have the more sensitive customer data, there can be as many as five levels of passwords (for example, desktop, soft token, gateway, server, and database). Sessions may expire after just 15 minutes, so that a worker has to sign in repeatedly over the course of the day. The cloud computing trend has increased the number of passwords, with workers signing in separately to a dozen disconnected services spread around the world. It is not an exaggeration to say that some workers spend one hour per day typing the same few dozen passwords over and over again.

Previous attempts to solve this problem by having a central database that holds all your passwords have failed with security gaps. Retina scans are effective for secure building access but don’t work for networks, which by nature are spread out. There nevertheless has to be an answer. There is inherently a tradeoff between productivity and security, but if workers are spending 100 million hours a day just signing in and signing out, that isn’t a sustainable pattern. There is a great deal of productivity to be gained by finding ways around the password problem.

Curfew Lifted

A curfew is a measure of a culturally ruined city, so I greet the news of the lifting of the curfew in Baltimore with a sense of relief. No curfew is ever evenly enforced. It is people who think, speak, study, listen to music, attend games, or generally help hold society together who are targeted for enforcement. When there is a curfew, the police stop arresting drug dealers because they are too busy hauling poets off to jail. The damage to the structure of the community is not repaired quickly. I live near a town that has lived with a curfew for generations. It is a town with no poets and no real teachers, a place where musicians, athletes, and social workers are treated with disdain. Obviously that could never happen to Baltimore, but what has happened over the years is that a veil of fear and blame has darkened the city’s efforts to make a difference in the world. People are celebrating today in Baltimore, lifted in part by the hope that this situation can now change.

This Week in Bank Failures

Most large banks will still tell you they have more branches than they know what to do with, but the rush to pare down seems to be over. Looking at the first quarter, PNC Bank recorded the most branch closings, but this added up to just one percent of its branch network. Chase Bank also is moving ahead slowly with its branch closing program, but several other large banks seem to have put their branch closings on hold.

Espirito Santo Bank in Miami will be sold to a Venezuelan investment group, pending regulatory approval. The $10 million selling price will help fund the liquidation of the former owner, the bankrupt Banco Espírito Santo in Portugal.