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Break up HP? Not so fast...

Posted by: Rob Hof on February 9, 2005

Andrew Hargadon, an associate professor of technology management at the University of California at Davis, was an intern at Hewlett-Packard in the early 1980s. That’s when the company released the HP 150, an early IBM-style PC that had a printer built in. It’s ironic, he notes today, that now so many people are calling for HP’s printer and computer businesses to be broken up. And he’s not so sure that’s a great idea. …

Hargadon, the author of How Breakthroughs Happen: The Surprising Truth About How Companies Innovate, says that a lot of innovation happens through cross-pollination of diverse technologies. He notes that cofounders Walter Hewlett and David Packard counted on this "next-bench" method of product development to move into new markets, such as computers. "If they'd 'stuck to their knitting,'" says Hargadon, "they'd still be making only oscilloscopes."

Spinning off the printer business could be a mistake, he says. "I think they'd be giving up a valuable set of skills." For instance, inkjet printing is now finding applications in chipmaking and medical treatments. Besides, he says, "HP can never out-Dell Dell. I really don't think they can compete on cost." So why not bet on innovation, where it at least has the expertise and the culture to maybe pull off some groundbreaking products?

But hasn't the industry changed such that the challenge of managing diverse businesses outweighs the advantage of having technologies close at hand? Maybe so, Hargadon says sadly. It's going to be a tough call, he concedes, because investors won't value an uncertain bet on innovation as much as money in their pockets from selling off pieces of the company. But if the answers aren't entirely clear right now, HP will be better off if the new CEO asks the right questions.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.



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