Hp's Threat to Steal Dell's Customers Termed Sophomoric ….

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Hewlett-Packard’s threat to steal Dell’s customers termed sophomoric by some, payback by others
By Steve Johnson
PALO ALTO — Hewlett-Packard’s (HPQ) threat Tuesday to steal customers from Dell, after the Texas company’s move to go private, prompted reactions ranging from "sophomoric" to "ironic," given the Palo Alto giant’s own troubles lately.

But several tech observers and analysts also noted that it’s common for competitors to try to lure away each others’ clients. Moreover, they said HP may have been seeking a little revenge when its news release declared, "We believe Dell’s customers will now be eager to explore alternatives and HP plans to take full advantage of that opportunity."

"It’s almost exactly what Dell and IBM said about HP at moments when HP was looking a little wobbly," said Roger Kay, an analyst with Endpoint Technologies Associates. "I would just say this is turnabout."

Kay added that such remarks often succeed in wooing customers away from a company perceived to be in an uncertain transition. "It seems kind of sophomoric, but everyone does it," he said. "And for HP, it’s kind of an opportunity to return the favor."

Dell’s future has been in question because its revenue largely depends upon sales of personal computers, which are slowing as consumers turn to smartphones and tablets. Hoping to revive the firm, founder Michael Dell announced a plan Tuesday to take it private

through a $24.4 billion leveraged buyout financed by him, Microsoft and equity firm Silver Lake Partners.

HP suffers many of the same problems as Dell, plus some others — including its recently admitted multibillion-dollar overpayment for software firm Autonomy. Nonetheless, it responded to Dell’s announcement by firing off a news release with a clear message aimed at the Texas company’s clients.

"Dell has a very tough road ahead," HP warned. "The company faces an extended period of uncertainty and transition that will not be good for its customers. And with a significant debt load, Dell’s ability to invest in new products and services will be extremely limited. Leveraged buyouts tend to leave existing customers and innovation at the curb."

"Some will see HP’s move as ironic, given they’ve had heaps of troubles over the last few years," said tech analyst Patrick Moorhead. International Strategy & Investment Group analyst Brian Marshall agreed. He termed HP’s news release the "pot calling the kettle black," and "aggressive PR from guys who don’t know how to execute."

Given HP’s own problems, technology analyst Charles King of Hayward-based Pund-IT called the statement "pretty surreal," and said it wasn’t clear it would lure away Dell customers.

Some experts said the news release might even hurt HP.

"With Microsoft backing this move, they might have been wiser not to comment," said tech analyst Rob Enderle, because Microsoft is a powerful adversary.

But Baird Equity Research analyst Jayson Noland saw HP’s tactic as having little effect, noting, "at the end of the day, I don’t think it changes the landscape that much."

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February 7, 2013 at 8:35 AM