Wednesday, July 18, 2012

HP – The Largest IT Company in The World

The new CEO is a Software Guy and has Prior Experience only in Enterprise sales – A Clear Mismatch with The Current Philosophy of HP – The Largest IT Company in The World. Is he The Right Choice?

While HP is known for its hardware, distribution and B2C business, software is more of loose change (accounting for 2.8% of HP’s topline for Q2, 2010). And this is precisely what Apotheker has set out to repair. Expectably, under him, HP’s focus on software will increase manifold. But with software, comes innovation. And Apotheker’s SAP files prove him a failure at it. Also, he has earned a reputation for establishing an environment at SAP, which focuses on high-cost and low return maintenance and support pricing, rather than profitable applications, despite the billions spent on innovation. The fact that he has also presided over product delays and has demonstrated ill-sense of pricing techniques, also does not ensure better days ahead for HP; the foreboding danger being a repetition of what happened to SAP – HP might soon find competitors chiselling away its PC market share.

So what should Apotheker do? He has options. The most irresistible one will be not to tamper with HP’s pride – its hardware business. But he is apparently going to do that, despite knowing that Hurd tried in vain to give HP a software and enterprise business edge with its acquisitions of EDS, 3Com and Palm. Neither did the $13.9 billion EDS acquisition help HP make waves in the consulting & services business (where IBM is #1), nor did the $2.7 billion 3Com buy manage a dent in the network arena where Cisco rules. And as far as the $1.2 billion Palm buy goes, everyone knows what an HP ‘smartphone’ looks like, right?

Many claim that Apotheker might do to HP what Palmisano did to IBM. But the truth is – the very imagination lacks logic. HP is not IBM. When IBM chose to go the software way, it was being sucked into a black hole, with its hardware business collapsing. It was then that IBM decided to shed deadweight. HP is in not in a similar situation by light-years! It is the #1 IT company in the world (having made $114.55 billion in revenues in FY2009) and sells the largest numbers of PCs and printers in the world (claiming 37% of global market share in the printer segment; Q3, 2010). What makes Apotheker believe that HP needs a makeover? Whether he will take a dig on cloud computing is a wonder (as he has had his share of expensive failures in this regard while at SAP, burning $5 billion in 2 yrs.), but what is inevitable, is that HP under Apotheker will join the battle to capture the enterprise space from the likes of Oracle and IBM. This would call for expensive acquisitions of players like SAP, Salesforce.com, et al, which will put big question marks on the ROI figure of HP, that is already lower than the industry’s (12.36 and 15.56 respectively).

All said and done, Apotheker has never before been answerable to such a large shareholder base. So the first task for him is not managing the finances or balancing the software-hardware see-saw. It is to win favour of and retain talent at HP, who would already have headhunters knocking at their sedan doors, as King of Mindspring adds, “HP enjoys a host of experienced, senior executives leading its printer, server, storage and networking divisions, who can keep the company’s efforts on track while Apotheker learns the ropes.” Lesjak (CFO), Bradley (Personal Systems Group Head), Robinson (CTO & CSO), Perez (Head of HR), and Joshi (Head of Imaging and Printing Group) are names which should find a regular place in Apotheker’s dining plans over the new few months, if he is to imagine any chance of being around at a multifaceted monolith like HP before his debut speech is forgotten this time.


Posted by at 11:22 AM
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Tuesday, July 17, 2012

NATO’s immature rants

That the Taliban uses the net to spread hate messages is well known – now, apparently, NATO is also on the same rot path; unfortunately, NATO’s internet rants are only flaming up Taliban passions

Lately, an already complex equation between NATO and Taliban in Afghanistan got worse due to an opinion war on Twitter! The reason the peace process is in pieces can be well understood – both parties regularly indulge in outlandish outbursts against each other. But the latest dialogue went further into ridiculously immature territory.Check the Twitter conversation between NATO’s International Security Assistance Force (@ISAFmedia) and a Taliban spokesperson Abdulqahar Balk (@ABalkhi) this month. @ISAFmedia: “...#Kabul attack: the outcome is inevitable. Question is how much longer will terrorists put innocent Afghans in harm’s way?”
@ABalkhi: “@ISAFmedia i dnt knw. U hve bn pttng thm n ‘harm’s way’ fr da pst 10 yrs. Razd whole vllgs n mrkts, n stil hv da nrve to tlk bout ‘harm’s way.”
@ISAFmedia: “Really, @abalkhi? UNAMA reported 80% of civilians causalities are caused by insurgent (your) activities”
@ABalkhi: “UNAMA is an entity of whom? mine or yours?”
@ISAFmedia: “Hey..., does your boss do this?” [linking to a video of NATO forces’ commander General John Allen taking stock of attacks on the ISAF HQ].

Taliban has been known to rant away on its Twitter handles and official ‘news’ site Shahamat (Voice of Jihad, if you may). But NATO’s current fall from grace has only placed it in a toxic, unclean bathtub, visible to all international commentators. The worrying part is that NATO’s vitriolic attacks may only be flaming up Taliban passions more, egging them on to keep attacking NATO posts.


Posted by at 12:24 PM
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Monday, July 16, 2012

Is there a CEO out there who can really run HP?

Three CEOs in six years and the inability to steady a concrete well set up business – this is what HP, one of the founding companies of Silicon Valley has to show. How can they put the house in order?

What do you do if you happen to be on the Board of a multi-billion dollar Fortune 500 outfit? Whatever it is, it shouldn’t be even remotely close to what the Hewlett-Packard (HP) board has been doing. In the past one decade, HP has perhaps done just two things right – acquiring Compaq and hiring Mark Hurd. The bad part is – it has done a lot more to undo and then outdo whatever has been undone. After kicking out Léo Apotheker from the position of President & CEO (who was just 11 months into the job), the board of HP led by Chairman Ray Lane has appointed Meg Whitman, Former CEO of eBay. No doubt she did a great job with taking the online portal public, but what the board didn’t perhaps consider is that she faltered once the company started growing. Moreover, she was heading a company that was 14 times smaller than HP in terms of revenues. In fact, if we were to go by Whitman’s political performance (she ran for the California Governor’s post and lost despite personally spending $141.5 million on the campaign out of her own pocket), then you can probably expect more boardroom drama and strategic mishaps in the months to come.

A brief study of the the company’s past decade suggests that HP’s failure has been twofold – its choice of CEOs and their respective strategies. But before we move on to how the company can be fixed, let’s see how the these two-fold blunders stack up.

Ever since the departure of Lewis E. Platt as President and CEO in 1999, HP’s talent hunt abilities have not been very encouraging. For instance, its obsession with hiring superstar CEOs from outside has not worked very well for the company. And since Whitman may also face quite a harsh reception, (as expected by industry experts), the HP board may well consider flicking through a gathering pile of academic studies for some help. In August this year, Richard Cazier of Texas Christian University and John McInnis of the University of Texas at Austin presented an unpublished paper at the annual conference of the American Accounting Association. The Professors studied 192 CEOs who had been hired from outside between 1993 and 2005. The paper shows that such CEOs are mostly hired at a premium from companies that have done well in the past. So far so good. Now here comes the catch.


Posted by at 12:05 PM
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Saturday, July 14, 2012

As the RTI Act completes six years, how does the entire story look in retrospect and what’s the future that we wish to shape for it.

Call it a lack of good faith or perhaps a misdirected agenda, but a landmark legislation that the UPA has been considerably responsible for, is under attack for obvious reasons. As the RTI Act completes six years, how does the entire story look in retrospect and what’s the future that we wish to shape for it. 
 
In a way, the PM’s statements should not come as a shock. After all, it is the RTI that has left the Congress on slippery track on more occasions than one. The most recent addition to this list was a note prepared by the Finance Ministry in March this year that faulted Home Minister P. Chidambaram for not exercising his complete powers as Finance Minister in 2008 to enforce an auction of valuable spectrum. The absence of that auction is said to be one of the major catalysts of the telecom scam, believed to be India’s largest swindle till date. Chidambaram was even asked to resign by the Opposition on the basis of the Finance ministry’s note. After a week-long political storm, Finance Minister Pranab Mukherjee ‘clarified’ that different ministries had contributed to the note and that he did not agree with all its inferences. However, his other colleagues who have been advocating for a weaker RTI with the reasoning that RTI hampers the ‘deliberative process’ of the government have found support with the PM. Soon after the PM’s statements calling for a critical look into the Act, Corporate Affairs minister Veerappa Moily said that certain ‘inbuilt weaknesses’ in the RTI Act need to be addressed and that the bureaucracy should know how to meet the challenges posed by it – such as ‘how to write in a file’. He reiterated that there was no intention to amend the Act. Law Minister Salman Khurshid was more diplomatic in his praise for RTI and said that there was no plan to revisit its provisions to his knowledge.

As reassuring that these assurances might seem, things have already started moving in the background. In a fresh development, the government is learnt to have framed new guidelines for addressing RTI applications. As per reliable sources, all RTI replies prepared by junior officers will now have to be vetted by a senior officer, preferably of the Joint Secretary rank, before they are sent to the applicant. Among the changes considered, sources say that RTI replies will have to be brief and will not be allowed to reveal much.


Posted by at 12:11 PM
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Friday, July 13, 2012

Bend It Like Bernanke: How Government Guarantees Shape Asset Prices

Professor Bryan T. Kelly of Booth School of Business and co-authors (Prof. Hanno Lustig of UCLA and Stijn Van Nieuwerburg of New York University) undertake a field research to understand how government intervention and economic outcomes offer new insights into the effect of bailouts on the value of the banking sector.

Europe is wrestling with structuring a bailout as its financial firms and broader economies teeter on a precipice. In America, markets look to Europe with unease while politicians bicker over whether stimulus and backstops established in 2008 and 2009 caused the current economic malaise or if it might have been worse. On top of all of this, uncertainty about the ultimate outcomes of government intervention exacerbate the deeper underlying uncertainty responsible for much or the morass.

According to a research undertaken byme, Hanno Lustig (UCLA) and Stijn Van Nieuwerburgh (New York University), we seek to better understand the interplay of government intervention and economic outcomes by offering new insights into the effect of bailouts on the value of the banking sector. When the government guarantees the survival of financial institutions that are “too systemically risky to fail,” it is effectively providing free crash insurance to anyone who holds bank stocks. More specifically, it insures the banking sector as a whole, but does not necessarily insure individual banks (contrast the bailouts of Bank of America and AIG with the failures of Lehman and Bear Stearns).

This effect can indeed be seen very clearly in the cost of put options on the financial sector ETF and put options on individual banks stocks (put options are in essence crash insurance for stocks and stock indices). We examine the prices of these insurance contracts prior to and during the 2007-2009 crisis in the US financial sector. What we find is that the cost of traded crash insurance (put options) on the entire financial sector become puzzlingly cheap during the crisis, while the prices of puts on individual banks remained high. In effect, the government substantially subsidised the cost of index puts, which drove down the prices investors were willing to pay for the traded version of this insurance. Since any individual bank may still fail amid a guarantee, the effect was much weaker for individual bank puts. The puzzling divergence in the cost of single name puts relative to index puts during the crisis is well-explained by the bailout story after all.


Posted by at 11:55 AM
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Thursday, July 12, 2012

Dead before they got started

With the rising incidence of suicides, higher education has to pick up fast in India to reduce the performance pressure

With the Indian education system proving its mettle with those chosen few ‘bright’ students, most of its unwanted side effects are disregarded. One of them is the alarming incidence of student suicides in India. With an overwhelming 7379 cases in 2010 (compared to 5857 cases reported in 2006 as per National Crime Records Bureau), immediate attention is the need of the hour.

According to academicians and mental health professionals, the major culprit is the entire philosophy behind the existing education system, where performance ranks above everything else. The associated pressure from parents, peers and society to excel in every sphere, poor regard for individual talent and blind obsession with a few career options are most likely causes.


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Wednesday, July 11, 2012

Naresh Chandra continues to perform a key role within the Indian government

Surprisingly, Chandra is not an isolated case. A number of high profile bureaucrats are allegedly making a fortune from their current/past presence in the bureaucracy/ministry and affiliation with regulators and policy makers. V. K. Shunglu, who is now serving PwC, had served as the comptroller and auditor general of India, the apex body having sole constitutional rights to audit independently. The same goes with B. B. Tandon, once chief election commissioner, secretary of the Ministry of Mines and the Ministry of Personnel, additional secretary of the Ministry of Corporate Affairs and also a member of the SEBI board. He is now on the advisory board of PwC.

Pradip Baijal, former Chairman, Telecom Regulatory Authority of India (TRAI) set up Noesis Strategic Consulting Company post his retirement for providing ‘advisory’ services. Ex-Indian Oil Chief M. S. Ramachandran is now chairman of Cals Refineries. R. V. Shahi, a former bureaucrat, is now chairman of total power solutions firm Energo. S. K. Roongta, former Chairman, Steel Authority of India Ltd., joined as MD of Vedanta Aluminium in April this year. These are crying examples of bureaucrats and PSU heads who are getting themselves into such positions where private companies can use them for unfair advantage. In fact, dozens of ex-bureaucrats and PSU executives become lobbyists and advisors in India. Similar is the case in the US too – as per estimates, around 43% of ex-Congressmen since 1998 are registered lobbyists. President Barack Obama tried to reduce the influence of ex-Congressmen on the Senate, a phenomenon called ‘revolving door’ – but was strongly contradicted by bellicose donors of the Democrats. He was worried about ex-Congressmen; while in India, people like Naresh Chandra don both hats with aplomb!

The government needs to monitor existing and previous bureaucrats with affiliations outside and take action. In the case of Naresh Chandra, he should not be in a position where there is a conflict of interest between his roles in private and public domains. He should take a cue from Nandan Nilekani, who ensured that he gave up his position at Infosys before taking over UID. It always pays for the greater good to lead by example.



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Tuesday, July 10, 2012

Japan’s new model of political leadership

Karel Van Wolferen, Author of The Enigma of Japanese Power, is Emeritus Professor of Comparative Political and Economic Institutions at the University of Amsterdam

Amid the horrifying news from Japan, the establishment of new standards of political leadership there is easy to miss – in part because the Japanese media follows old habits of automatically criticizing how officials are dealing with the calamity, and many foreign reporters who lack perspective simply copy that critical tone. But, compared to the aftermath of the catastrophic Kobe earthquake of 1995, the difference could hardly be greater. This time, Prime Minister Naoto Kan’s DPJ (Democratic Party of Japan) government is making an all out effort, with unprecedented intensive involvement of his cabinet and newly formed specialized task forces. The PM himself is regularly televised with relevant officials wearing the work fatigues common among Japanese engineers.

In 1995, Kobe citizens extricated from the rubble were looked after if they belonged to corporations or religious groups. Those who did not were expected to fend mostly for themselves. This reflected a ‘feudal’ like corporatist approach, in which the direct relationship between citizen and state played no role. This widely condemned governmental neglect of the victims was among the major sources of public indignation that helped popularize the reform movement from which Kan emerged.

Unfortunately, today’s Japanese media are overlooking that historical context. For example, the newspaper Nihon Keizai Shimbun recently lamented the shortcomings of the Kan government’s response, emphasizing the poor lines of command running from the cabinet to officials carrying out rescue and supply operations. But it failed to point out that the feebleness of such coordination was precisely the main weakness of Japan’s political system that the founders of the DPJ had set out to overcome. When the DPJ came to power in September 2009, it ended half-a-century of de facto one-party rule by the Liberal Democratic Party (LDP). But even more significantly, its intentions addressed a cardinal question for Japan: who should rule, bureaucratic mandarins or elected officials? The LDP, formed in 1955, had not done much actual ruling after helping to coordinate post-war reconstruction, which extended without debate into an unofficial but very real national policy of, in principle, unlimited expansion of industrial capacity. Other possible priorities hardly entered political discussions. The need for a political steering wheel in the hands of elected politicians was highlighted in 1993, when two major political figures bolted from the LDP with their followers. By doing so, they catalyzed the reformist political movement that resulted in the DPJ, the first credible opposition party that was prepared to win elections and actually govern. Lowering the prestige of the government right now is the fact that Kan has not shown any talent for turning himself into a TV personality who can project a grand image of leadership. But his government is dealing as best it can in the face of four simultaneous crises, its efforts encumbered by huge logistical problems that no post-World-War-II Japanese government ever faced before.

The efforts of Kan’s government are obviously hampered by a rigid and much fragmented bureaucratic infrastructure. The DPJ has had scant time to make up for what the LDP has long neglected. Its seventeen months in power before the current catastrophe have been a saga of struggle with career officials in many parts of the bureaucracy, including the judiciary, fighting for the survival of the world they have always known.

But it was the US that first undermined the DPJ administration, by testing the new government’s loyalty with an unfeasible plan – to build a new base for US Marines stationed on Okinawa. The first DPJ prime minister, Yukio Hatoyama, miscalculated in believing that a face-to-face meeting with the new American president to discuss long-term matters affecting East Asia could settle the issue. He was steadily rebuffed by the US government. As Hatoyama could not keep his promise to safeguard the interests of the Okinawan people, he followed up with a customary resignation.

Japan’s main newspapers have mostly backed the status quo as well. Indeed, they now appear to have forgotten their role in hampering the DPJ’s effort to create an effective political coordinating body for the country. A half-century of reporting on internal LDP rivalries unrelated to actual policy has turned Japan’s reporters into the world’s greatest connoisseurs of political factionalism. It has also left them almost incapable of recognizing actual policy initiatives when they see them. The rest of the world, however, has marveled at the admirable, dignified manner in which ordinary Japanese are dealing with terrible adversity.



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