Hewlett-Packard’s Strategy Gets Cloudy

by Tom Taulli | April 10, 2012 11:38 am

Cloud computing should be a nice growth opportunity for Hewlett-Packard (NYSE:HPQ[1]), which has extensive technology solutions for data centers. This emerging approach centralizes business applications, which means customers do not have to spend huge amounts on hardware and servers. The trend has bolstered the fortunes of tech companies like Salesforce.com (NYSE:CRM[2]) and NetSuite (NYSE:N[3]).

To capitalize on things, HP is going forward with a new initiative[4] called “HP Converged Cloud.” True, it’s not a memorable phrase and sounds like consultant-speak. But the approach has some promise.

Hewlett-Packard CEO Meg Whitman wants to consolidate the company’s myriad software assets and make them cloud-ready, which should cure some inefficiencies and allow for more integrated offerings.

However, while combining different departments is easy and bringing sales and tech reps together sounds great, something that shouldn’t be overlooked is the occasional difficulty to get people to work together. And the fact remains that HP has been plagued by political fiefdoms and drama over the years.

Another problem is that HP’s competitors already have been making their own moves into the cloud. For instance, Oracle (NASDAQ:ORCL[5]) and SAP (NYSE:SAP[6]) have struck multibillion-dollar acquisitions. SAP also has been aggressively making venture investments in Silicon Valley[7], and one of its deals — online marketing company ExactTarget (NYSE:ET[8]) — recently went public.

And keep in mind that the cloud market is far from cemented. Major changes include a growing move into social networking, where fast-growing companies like Jive Software (NASDAQ:JIVE[9]) and Yammer thrive, and mobile technology also is becoming a key growth driver.

So while it is important that HPQ finds ways to simplify its organization and invest much more in cloud technologies, the company is woefully behind the curve and might never be able to catch up to its nimble rivals.

Tom Taulli runs the InvestorPlace blog IPO Playbook[10], a site dedicated to the hottest news and rumors about initial public offerings. He also is the author of “The Complete M&A Handbook”[11]“All About Short Selling”[12] and “All About Commodities.”[13] Follow him on Twitter at @ttaulli[14] or reach him via email[15]. As of this writing, he did not own a position in any of the aforementioned securities.

  1. HPQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=HPQ
  2. CRM: http://studio-5.financialcontent.com/investplace/quote?Symbol=CRM
  3. N: http://studio-5.financialcontent.com/investplace/quote?Symbol=N
  4. new initiative: http://bits.blogs.nytimes.com/2012/04/10/hewlett-packard-once-more-at-the-cloud/
  5. ORCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=ORCL
  6. SAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=SAP
  7. venture investments in Silicon Valley: https://investorplace.com/ipo-playbook/sap-goes-on-the-startup-hunt/
  8. ET: http://studio-5.financialcontent.com/investplace/quote?Symbol=ET
  9. JIVE: http://studio-5.financialcontent.com/investplace/quote?Symbol=JIVE
  10. IPO Playbook: https://investorplace.com/ipo-playbook/
  11. “The Complete M&A Handbook”: http://goo.gl/aLNDk
  12. “All About Short Selling”: http://www.amazon.com/All-About-Short-Selling/dp/0071759344/ref=sr_1_1?s=books&ie=UTF8&qid=1302184310&sr=1-1
  13. “All About Commodities.”: http://www.amazon.com/All-About-Commodities/dp/0071769986/ref=ntt_at_ep_dpi_10
  14. @ttaulli: https://twitter.com/ttaulli
  15. email: mailto:tom@taulli.com

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