The inability to respond in a timely manner to this threat may be an indicator that HP is becoming too complex to manage, though Mark Hurd and Shane Robison have already demonstrated a skill in managing complex companies that is unparalleled, given HP's performance through last year. However, in this game you are only as good as your current quarter, and this last one was clearly tough. On the other hand, in what has been a tough quarter across the industry, HP actually did reasonably well and the fact that it took such a small revenue hit from Services indicates that its merger skills rival some of the best in the industry. In addition, it is the only server vendor that can take the fight to Cisco.
Both IBM and HP are under marketing at the moment, which I believe is having an adverse effect on their financial performance. If you look at vendors like Microsoft and Apple, which are aggressively marketing during the downturn, both are showing benefit from the marketing efforts. Apple continues to maintain margins higher than anyone else in its segment. Microsoft's efforts are actually having a strong offsetting effect on consumer sales behavior. PCs are actually doing substantially better than they should and products that are not as well marketed in similar segments, like TVs, are taking it in the shorts. Under Louis Gerstner, IBM marketing was second to none in its class. HP's PC marketing has historically come very close to Apple levels. Both are off the mark and I think that has adversely affected both companies' results. Cutting marketing in a downturn is a classic textbook mistake, and Apple is one of the few companies that doesn't make it.