HPE’s The Machine: Nice Promotion for IBM Watson, But Not HPE

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    HPE has released a number of interesting but largely unseen technologies so far this decade. There was the Helion Hybrid Cloud offering, the amazing Memristor, which was both memory and processor, and perhaps the most aggressive offering, “The Machine.” The Machine has been tied to the latest Star Trek movie, implying that there is some inherent connection between Star Trek and HPE’s labs. Either that or HPE is outsourcing some of its R&D to Paramount. Given the state of HPE innovation, that may not be a bad idea.

    Since HPE’s current strategy seems more focused on selling off parts of the firm, you might question whether The Machine will ever be any more than slideware, and you’d be in good company. HPE promises to have a prototype by the end of the year but this is where IBM was back in 2011 with Watson, and it took the company years to develop the training needed for this class of product. This suggests that HPE won’t have a finished offering until next decade, assuming the firm survives. (I have my doubts.)

    So why invest what has to be millions promoting something that likely won’t be mature enough to sell before the end of the decade, if then?

    Let’s talk about what HP is doing here this week.

    Form over Substance

    The layoffs, sell offs, and breakup of HPE is driving speculation across the segment that it is being sold for parts. Sales have to be suffering more than the financials currently are showcasing.

    One of the things a politician learns early on is that you can promise almost anything and folks won’t hold you accountable unless you actually do some of what you promised. The bigger the promise, the less likely it will ever be carried out. And, if you focus people on the future and they buy the promise, your valuation should benefit or, at the very least, it will take the attention off your current innovation, or lack thereof.

    Star Trek

    Using a recognized brand tied to the future is an interesting idea. What seems strange, given the fact that The Machine is presented as a very high-speed analytics platform using photonics for data movement, is that in the movie it is tied to “the quarantine,” a “diagnostics wrap,” and “the book”. My guess is the first two things are medical in nature and the last is some kind of dynamic, always-updated reference device.

    So it looks like it’s positioned against IBM Watson, which has been focused on similar opportunities but actually exists in market.

    So Why?

    Here is the kicker: Why spend millions of dollars promoting a future version of a product that won’t even exist as a prototype until the end of the year, let alone something you can sell?

    It’s because the product they’re selling is HPE’s stock, not The Machine. HPE wants investors to see a disruptively positive future for HPE in order to increase its perceived value.

    If your goal is to move the stock, why not just focus on moving the stock and forget about all of those aging products?

    Wrapping Up: HPE’s Strategy

    HPE is spending millions of dollars, not to create demand for its product, but to create demand for its stock, which drives up valuations. This certainly makes stockholders happy, but it does little to build demand for HPE’s existing products. It showcases once again what may be an excessive focus on valuation, often at the expense of good operational judgment.

    One big danger, however, is that a competitor could step in and point out that it has the equivalent of The Machine today. IBM could do this with Watson and so could a little company called Beyondcore that I wrote about in 2014.

    So you can get a The Machine-like product today, you just can’t get it from HP. If investors figure that out, I doubt the stock will behave in line with this marketing campaign. In the end, this only goes to showcase the kind of questionable decisions public companies continue to make.

    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+.

    Rob Enderle
    Rob Enderle
    As President and Principal Analyst of the Enderle Group, Rob provides regional and global companies with guidance in how to create credible dialogue with the market, target customer needs, create new business opportunities, anticipate technology changes, select vendors and products, and practice zero dollar marketing. For over 20 years Rob has worked for and with companies like Microsoft, HP, IBM, Dell, Toshiba, Gateway, Sony, USAA, Texas Instruments, AMD, Intel, Credit Suisse First Boston, ROLM, and Siemens.

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