Bill and Dave…and Dilbert

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 There’s a Dilbert cartoon in which a frazzledstaffer tells the Pointy-Haired Boss, “Our numbers are way down.  What should we do?” to which the Pointy-Haired Boss calmly responds,“Reorganize the department so there’s no valid history for comparison,” before adding, almost as an afterthought, “Then we’ll fire a few people and giveourselves awards for saving money,” while the incredulous staffer mutters “El Diablo!” That cartoon is not far from the reality of what has been going on the last few years in onecorner of Silicon Valley—specifically the corner of Page Mill Roadand the Foothill Expressway, home of a once proud, and mighty company foundedby two pioneering engineers: Bill Hewlett and Dave Packard. You can probably guess which company that is. In any event, Dilbert came to mind as we werelistening to the recent meeting at which the managementof that company finally admitted what everybody who more or less paid the least bit of attentionto what was going on out there in Palo Alto already knew: that things weren’tgood. At all. Now, readers of this column can’t say that anythingthat happened at last week’s meeting surprised them, excepting the fact thatfor one, brief, shining moment the scales seemed to fall from the eyes of WallStreet’s Finest: for some reason we do not quite grasp, the bright, shiny object—“non-GAAP Earnings”—the company has been waving to distractthem from reality suddenly stopped working. But last week’sanalyst meeting did have at least two whoppers that go beyond earnings puffery,recurring “one-time” charges and—our biggest beef—including only the good stuff from acquisitions like EDS (i.e.revenues) while excluding all the bad stuff (i.e. all the costs associated with turningEDS around…which appear endless, thus far).Whopper #1 “In addition, another challenge is that HP hastoo many areas of focus, whether it's products or services or geographies. WhenTodd Bradley took over the Printing and Personal Systems business, he wassurprised to find that we made more than 2,100 laser printers. In everybusiness, we're going to benefit from focusing on a smaller number of offeringsthat we can invest in and really make matter.”—MegWhitman, CEO Thus we have a Dilbert-esque situation inwhich anybody who’s ever tried to accomplish the maddening task of downloading the correct driver for a particular HP printer knows what a company veteran apparently, somehow, did not.Whopper #2 “Autonomy has—as we showed you here, this was an Autonomytechnology. It has tremendous technology, second to none, and has a lot ofpotential to it. Where we are struggling with right now, and I'll use that wordeven, is the sales model was very non-scalable…”
—George Kadifa, EVP Software In this case, one year after closing on a $10billion acquisition (remember, that was 11-times revenue), and eleven monthsafter telling Wall Street’s Finest that “The integration is going well thus far,and we are focused on enabling our global sales force to ramp on the Autonomyproduct line-up, so they can begin selling Autonomy software in Fiscal 2012,” the world is now told Autonomy’s sales model “was very non-scalable” in the first place.
 Not somewhat non-scalable. Very non-scalable.
 We’re not sure what the truth behind bothassertions may be, but it does seem time for somebody to be held accountable atthe house of Bill and Dave—Ha!  We’rejoking.   It’s time for another reorg, of course. 

Jeff MatthewsAuthor “Secrets in PlainSight: Business and Investing Secrets of Warren Buffett”(eBooks on Investing,2012)    Available now at Amazon.com
© 2012 NotMakingThisUp,LLC                                    The content contained inthis blog represents only the opinions of Mr. Matthews.   Mr. Matthews also acts as an advisor andclients advised by Mr. Matthews may hold either long or short positions insecurities of various companies discussed in the blog based upon Mr. Matthews’recommendations.  This commentary in noway constitutes investment advice, and should never be relied on in making aninvestment decision, ever.  Also, thisblog is not a solicitation of business by Mr. Matthews: all inquiries will beignored.  And if you think Mr. Matthewsis kidding about that, he is not.  The contentherein is intended solely for the entertainment of the reader, and the author.