Reflections on the transformation of HP into the IT industry

On August 18, US time, the IT industry giant Hewlett-Packard Co., with the opportunity to announce its third-quarter financial report, made a series of “blockbusters” to the global market, announcing the company’s transformation and announcing the possible separation of information product groups (PSG). PC Division confirmed the possibility of merger with British software company Autonomy and announced that it no longer operates webOS devices (including Touchpad and webOS phones) and announced the appointment of a new global leader in the Enterprise Service... Like a storm without warning signs in the summer, it immediately fell into the hearts of everyone who was concerned about HP, and it also swept the entire IT industry...

Many people do not agree with this. They think that HP should not give up its $400-billion-a-year-old PC business, and it is difficult to get such high revenue through software in a short period of time. Others believe that the mobile Internet has developed so rapidly that it is so short-sighted that it decided to abandon the TouchPad based on WebOS so quickly. Is HP's move right or wrong?

The dusk of the PC industry can be understood through HP's financial report. The actual profit rate of the HP PC business with an annual revenue of 40 billion US dollars is only 5.9%. HP's other business profits are almost double digits. HP, as a commercial company, abandoned the PC business for higher profits. This is an apparent reason for everyone. For this, some people think that 40 billion US dollars is a big revenue after all. Although 5.9 percent of profits are not high, they also have more than 2 billion U.S. dollars in revenue. Looking at China as a whole, there is no IT company with such a high absolute profit.

However, we can't look at the issue with a static vision. After all, the PC market is shrinking. Due to severe price shocks, profit margins have dropped sharply, and now the frequency of users changing PCs is getting lower and lower. These all make the PC industry a "yellow flower." "It makes the industry shuffle the inevitable trend.

In fact, the final decision of the development of the PC industry is not in the hands of PC companies, but is determined by the upstream chip and software companies. The Wintel Alliance has jointly upgraded its CPU and operating system to enable users to quickly replace new PCs. With the gradual failure of Moore's Law, the CPU continues to upgrade and encounter difficulties; and with the popularity of broadband Internet, users no longer need a faster PC, a network can be used, a simple device is enough; plus Windows The upgrade of the system does not require a significant increase in hardware. These reasons have led to a slowdown in the pace at which users replace PCs, which will inevitably affect the growth rate of PCs. Gartner, an internationally renowned market research firm, reduced its forecast for the growth rate of the global PC market in 2011 from 10.5% to 9.3%. IDC also recently lowered its 2011 global PC shipment growth rate from the original forecast of 7.1% to 4.2%. In the first quarter of 2011, the shipments of HP, Dell, and Acer were all negative growth...

At the same time, the emergence of smart phones and portable Internet devices has drastically lowered the price of PCs and kept the PC industry profitability down. HP's PC profit margin was 5.9%, Dell's was 2.5%, Founder's was 4.9%, and Acer's gross profit was only 2.3%. Such low profits have seriously hampered the development of the PC industry, and only a large enough scale can produce a considerable economy. benefit.

Currently in China, there are more than a dozen brands competing in the PC industry. Although acquisitions and mergers have been much less in recent years, it is still in the “Red Sea” of vicious competition. You can feel this by going to any computer city. Moreover, with the slowdown in the growth rate of global PCs, the market space is being squeezed, and in the future will usher in a more extensive reshuffle. Hewlett-Packard abandoned the PC business to leave early, is not without prejudice. Looking at the Hewlett-Packard computer from another perspective, this change is not a bad thing for itself. No matter how independent it is, it helps it to enhance its autonomy and flexibility in this fierce competition. The Red Sea enhances its competitive advantage.

Cloud Computing Opportunities The rapid adoption of smartphones and portable Internet access devices has obviously changed the life of the PC industry. However, along with the large-scale coverage of broadband and 3G wireless Internet, this has also opened up new opportunities for the development of cloud computing in the industry. A door of opportunity, whoever seizes this opportunity, is likely to achieve new success.

IBM was the first to abandon the PC transformation IT service giant. When it abandoned the PC business in 2005, it was at the peak of PC development. IBM's PC business also contributed 10 billion US dollars, but IBM did not hesitate to sell it for 1.25 billion US dollars to fully participate in the IT service industry. This is considered to be a classic case of successful transformation of the Blue Giant.

In the second quarter of 2011, IBM's gross profit margin was 46.4%, and its operating margin (non-GAAP) was 46.8%. As of the end of the second quarter, IBM had total cash of 11.8 billion U.S. dollars, and free cash flow in the second quarter was 3.4 billion U.S. dollars, an increase of approximately 350 million U.S. dollars. By distributing 90 million U.S. dollars in dividends and buying back 4 billion U.S. dollars, it will return 4.9 billion U.S. dollars to shareholders. Abandoning the PC business, transforming IT services, and investing in cloud computing have given IBM shareholders a huge return.

Hewlett-Packard also chose to give up at the moment when the global PC business was facing an inflection point, and then devoted itself to cloud computing this blue ocean. And HP's move was not a one-time move. As early as March 2011, when HP's new global strategy was announced, HP clearly signaled that it would become a leading provider of cloud computing platform services. Based on the traditional hardware advantages of enterprise-class storage, servers, and networks, HP uses a "software + service" approach to help customers complete the transition from a traditional computing environment to a hybrid cloud with a complete set of cloud solutions.

In addition, it is worth noting that HP has previously made a careful layout of cloud computing. Acquisition of security software company ArcSight to provide security services for cloud computing; acquisition of 3PAR layout cloud storage; acquisition of 3COM to strengthen HP's network and service technology ... In addition, the acquisition of EDS, Opsware, Mercury Interactive and other companies, all for its transformation be prepared. Now it has announced the acquisition of Autonomy, which specializes in searching, analyzing, and sorting all kinds of data. This means that HP is well prepared for cloud computing. Previously, HP also released a series of Chinese cloud computing strategies, including the construction of its first cloud computing demonstration center in China, the HP Cloud Computing Solution Center in China.

It is impossible for any company to take over all industries. HP abandons the PC business to focus on cloud computing. It is a wise move to increase the company's profit margin through “software + services” and enter the more promising commercial market. Moreover, PCs and terminal companies will eventually become customers of HP's business services. If HP retains the PC business, there will be a clear competitive relationship with these customers, which will also become a stumbling block to its cloud computing business promotion.

Speculation about the future pattern of the IT industry Nowadays, the global IT industry has reached a turning point. The future industry sub-unions become more and more meticulous, and no enterprise can achieve the whole industry chain. So here I make the following predictions:

First of all, the PC industry will face a large area of ​​reshuffle. HP's PC business may be taken over by Lenovo, Samsung and other companies. In comparison, I am more optimistic about Lenovo taking over the business, because Lenovo has already had a large-scale advantage in the PC industry, and can better improve profitability after taking over; and the future PC manufacturing companies will only have a maximum of 3 remaining companies. Because the market space is squeezed, many PC companies are either bought or sold, or are dead. The three companies that focus on PC manufacturing rely on large-scale, low-margin survival.

Second, the iPad tablet will eventually end up on the netbook. Affected by the favorable situation of the iPad, many companies have launched high-profile tablet PCs. However, such tablet PCs can only face the niche market. Only flat panels that can revolutionize laptops may gain a huge market. But I think Android can't afford the burden of this revolution. For operating systems, I'm still more optimistic about Windows 8.

Finally, the IT industry landscape will become very clear. Companies such as Google, IBM, Hewlett-Packard, Cisco, and Microsoft have worked hard in the cloud computing and solution market, and Lenovo, Dell, and Acer have worked on consumer products such as PCs. iOS, Android, and Windows Phone will be the three pillars of the mobile portable device operating system market. The operating system that still holds more than 90% of the operating system in the PC market is still Windows.