It has been interesting to watch Dell and HP compete, with each going down nearly opposite paths. Dell has been doubling down on PCs for the last several years and its big move was going private to eliminate distractions and better focus on customers. HP has been a bit of a CEO revolving door, from Carly Fiorina, who bought leadership into the PC market by merging with Compaq and recognizing the power of a consumer product, to Meg Whitman, who basically reversed Fiorina’s moves, turning HP into two companies: one focused on the enterprise business and the other focused on PCs and printers.
Strategy is measured by results; the IDC and Gartner numbers are out and they're pretty telling.
Before we get to that, though, let’s look at the background.
Dell vs. HP
Both Dell and HP had difficulties last decade with CEO choices. Michael Dell attempted to retire from his CEO duties only to find, like many founders do, that his handpicked replacement just wasn’t up to the task of running his company. We saw the same thing at Microsoft over a longer period with Steve Ballmer. The clear lesson was that you really need someone who understands deeply both the industry and the underlying technology to be successful as a tech CEO. At Microsoft, they replaced Ballmer with subject matter expert Satya Nadella, and the result is almost a different company, one more like the firm during the ‘90s when it was more successful. Michael Dell, who was certainly still young enough, instead decided to return to the role, but like a lot of CEOs, what he hated about the job was the public side. The combination of compliance requirements and excessive focus on quarterly returns seemed to be at the core of the failure, so he took the firm private to eliminate those problems.
As a side note, he had already demonstrated a strong ability to solve problems because when he saw that most mergers and acquisitions fail, he went searching for the best process in the industry, emulated it, and now Dell is considered the best in technology at doing mergers.
HP’s founders are long gone and the company had become bound by process and history, causing it to lose its agility. It then began to go through boards and CEOs very rapidly, eventually finding Mark Hurd, a subject matter expert, who actually appeared to be making excellent progress, although he faced what almost seemed like outright hatred from HP employees. When Hurd screwed up and had to be fired, he was replaced by a software company ex-CEO who had been unsuccessful and subsequently failed faster than Hurd’s predecessor. He was then rapidly replaced in a coup by Whitman, who had failed at running for California Governor but had been successful at eBay during the early years, although she’d been replaced when the company outgrew her.
Having learned during her run for Governor the importance of being loyal to her employees (her cavalier firing of her long-time, but unfortunately illegal housekeeper, affected her in the election), and from IBM the critical importance of having PCs to support a large x86 server business, she should have had what she needed to be successful. (After IBM sold its PC business to Lenovo, the consequential damage to its x86 servers business was too great to sustain and it had to eventually sell it as well, ironically proving HP’s earlier CEOs right.) But ignoring both lessons, she has aggressively replaced her executive staff, and spun out HP’s PC business. But even though it mirrored Dell's process of ensuring successful acquisitions, HP is known for some of the most disastrous in the market, e.g., Palm, Autonomy. So you’d have to expect that comparing the two firms' results would be dramatically different.
PC Sales Results
IDC and Gartner results are in. In an ugly worldwide market, Dell was basically flat year over year with HP dropping nearly 10 percent according to Gartner, which is basically in line with the overall market. IDC measures things a bit differently. According to them, Dell dropped 2 percent but HP dropped over 10 percent, also in line with the market. Interestingly, both Dell and Apple massively outperformed the worldwide market.
The U.S. market was far stronger and perhaps even more telling because Lenovo, which took over the worldwide lead from HP some time ago, is relatively weak in the U.S. This is likely a better indicator of HP vs. Dell performance. Here, Dell grow 3 percent in a market that lost 6 percent year over year and HP lost a whopping 17 percent, according to Gartner. Once again, IDC’s numbers are different and they have Dell growing at 4.2 percent and HP dropping by 14 percent (or twice the speed of the overall market), allowing Dell to pass HP in both cases for the number-one spot in the market.
I should add that Lenovo, which is also executing a similar strategy to Dell’s but with an even greater focus on the consumer side of the business, grew at 21 percent, according to IDC (albeit from a much smaller base). If these rates sustain, Lenovo will pass HP in the U.S. in 2019 and Dell will pass HP in the worldwide market a year earlier. I should also point out that Lenovo roundly beat Apple in the U.S. PC market starting from a similar base, likely showcasing that Tim Cook’s Apple and Steve Jobs' Apple are very, very different. Lenovo and Apple are the only firms that aggressively do tablets, smartphones and smart watches, and Lenovo is the only firm that is trying to recreate Jobs’ unique ability to pitch products using Ashton Kutcher (which is interesting all by itself).
I think all this really speaks to the importance of both having a subject matter expert as a CEO of a tech company and a CEO that learns from mistakes (either their own or from others). The latter has been an endemic issue for tech companies in general because they seem to focus more on assigning blame than on doing root cause analysis and documenting what was learned to avoid future mistakes. Ironically, tech firms often fire the one executive who actually learned the lesson.
The lesson for any upcoming manager is to own and learn from your mistakes because, eventually, a practice of merely finding scapegoats is a losing one.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+.