Seeking Direction: HP and MSOs Both Struggle

HP has been having its problems, obviously, and they’re interesting from a whole-industry perspective because HP is both a broad-based player and a potential major contender for leadership in the future network/IT fusion.  The problem right now is that they’re locked up in a restructuring mess and there’s a real risk they’re not going to emerge—ever—as a healthy player.

When HP said it would dump its PC business, everyone got all up in arms.  It’s a third of their revenue after all.  The problem is that PCs are at best a thin-margins-till-the-end-of-time game and at worst something everyone is going to have to cede to cheap offshore manufacturers in any case.  And that’s if you believe they will survive at all in a post-tablet world (which I do, by the way).  The trouble is that when Whitman reversed the decision, it left unaddressed the really big problem, which was that HP really didn’t have a firm strategy to lead them into the future.  Even Whitman couldn’t believe PCs were that strategy, so what was it, and where is it?

Like every vendor in the IT or networking space, HP has to either believe in a cloud vision or not.  If there’s not going to be much of a cloud revolution, then there will likely always be a fundamental division between information appliances that are designed for some heads-down production and those that are more for looking and doing simple-low-input tasks.  PCs, especially laptops, are in the former group and tablets and smartphones in the latter.  That means the no-cloud future guarantees PC survival but makes it clear that the value proposition isn’t likely to expand.  How many producers are there out there compared with the number of dabblers?  HP doesn’t have much of a win here.  So how about if there IS a cloud vision?  That’s also a forked road.

If cloud success comes from displacing internal IT, then the cloud will commoditize and marginalize servers and PCs alike, because that’s what current IT is run on.  You can’t displace internal IT with hosted IT at higher costs, and you can’t assume that hosted IT will consume more servers than internal IT did if costs aren’t higher.  Thus, HP loses servers in a cloud future, UNLESS that cloud future somehow builds from more than just cost-based shifting of apps from data centers to hosting.  HP’s success would depend on a non-displacement success for the cloud.  OK, that seems simple to me, but not to HP, apparently, because they’re not doing anything that suggests they have a view of where the new, non-displacement, cloud apps are coming from.  I’d sure like to know what HP’s cloud vision is, because I think that their reorg focus so far has been mostly on keeping the Street in the dark about how badly components like their PC business are doing.

We’re possibly on the verge of another revolutionary change too, this time in the cable space.  Comcast and other cable operators are looking seriously at how to transition to something that’s more IP-oriented in the delivery of their video programming.  Here, as in the cloud, I think we’re seeing an example of someone testing the waters without knowing whether they want to swim or fish.  How good is Comcast’s convergence platform RFI going to be when it’s far from clear how much IP video can be made profitable—if any?

Linear RF is the best way to deliver broadcast, if broadcast is all you’re going to do.  The problem is that for most operators, you also have to contend with things like VoD and broadband Internet.  These compete for cable spectrum, and the more you have to provide to these non-broadcast apps the fewer channels you can fit into the remaining space.  At some point you have to ask yourself whether you’d be better off pushing everything out in IPTV form from a single pipe, particularly if you need to be delivering TV Everywhere content over IP to other devices anyway.

The problem here is that we have an RFI going out for a market that has no convincing business, technical, or regulatory foundation.  Add this to the fact that over 80% of all carrier RFIs never deliver any equipment and you have a picture of the cable industry in the throes of the same confusion that HP is in.  They’re just confused about something different.


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