Bill and Dave…and Dilbert

There’s a Dilbert cartoon in which a frazzled staffer 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 give ourselves 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 one corner of Silicon Valley—specifically the corner of Page Mill Road and the Foothill Expressway, home of a once proud, and mighty company founded by 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 were listening to the recent meeting at which the management of that company finally admitted what everybody who more or less paid the least bit of attention to what was going on out there in Palo Alto already knew: that things weren’t good.

At all.

Now, readers of this column can’t say that anything that happened at last week’s meeting surprised them, excepting the fact that for one, brief, shining moment the scales seemed to fall from the eyes of Wall Street’s Finest: for some reason we do not quite grasp, the bright, shiny object—“non-GAAP Earnings”—the company has been waving to distract them from reality suddenly stopped working.

But last week’s analyst 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 turning EDS around…which appear endless, thus far).

Whopper #1

“In addition, another challenge is that HP has too many areas of focus, whether it’s products or services or geographies. When Todd Bradley took over the Printing and Personal Systems business, he was surprised to find that we made more than 2,100 laser printers. In every business, we’re going to benefit from focusing on a smaller number of offerings that we can invest in and really make matter.”

—Meg Whitman, CEO

Thus we have a Dilbert-esque situation in which 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 Autonomy technology. It has tremendous technology, second to none, and has a lot of potential to it. Where we are struggling with right now, and I’ll use that word even, is the sales model was very non-scalable…” —George Kadifa, EVP Software

In this case, one year after closing on a $10 billion acquisition (remember, that was 11-times revenue), and eleven months after 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 Autonomy product 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 both assertions may be, but it does seem time for somebody to be held accountable at the house of Bill and Dave—Ha! We’re joking.

It’s time for another reorg, of course.

Jeff Matthews

Author “Secrets in Plain Sight: Business and Investing Secrets of Warren Buffett”

(eBooks on Investing, 2012) Available now at Amazon.com

© 2012 NotMakingThisUp, LLC

The content contained in this blog represents only the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations. This commentary in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. Also, this blog is not a solicitation of business by Mr. Matthews: all inquiries will be ignored. And if you think Mr. Matthews is kidding about that, he is not. The content herein is intended solely for the entertainment of the reader, and the author.