Idaho U.S.A.: Another Look At The $180M HP Contract

[Anonymous]

Idaho U.S.A.: Another Look At The $180M HP Contract

Large government contracts, those in the tens or hundreds of millions of dollars or — gulp! — more, can be hard things for non-fiscal specialists to digest. But along came one in Idaho a few days ago we could chew on.

This was the contract, one of the largest single state government awards in Idaho history, by the Department of Education awarded to Hewlett-Packard Corporation: $181.9 million for laptops, and their repair and a wireless system for Idaho schools. The price adds up to about $293 per laptop (for a half-million of them), plus additional for upfront and buyout costs. (These numbers should be considered approximations; there are a lot of moving pieces among the contract numbers.)

This per-unit price doesn’t sound unreasonable, factoring in on one hand the normal purchase price for a basic laptop using Windows, and on the other the cost savings in such as large mass buy.

In our small business, though, it wouldn’t have made the cut.

Not because of the HP brand: Two of our most-used machines, including the laptop on which this is written, are HPs. But we make only limited use of Windows (somewhat more of a couple of Apple computers). Mostly, we use the operating system called Linux, and we use it on those HP machines. One reason we use it is because it’s free — literally, downloadable for free, no strings, no catch. All the software we use on it, ranging from close equivalents to Windows Office to browsers to desktop publishing and technical software, and a good deal more, is also free. It ranges the Internet even better than Windows, no surprise since the bulk of Web server computers worldwide are run on Linux or on closely allied software. And not only that, it’s “open source,” which means you can (if you choose) go into the guts of the program, and change anything you want. Can’t do that with proprietary programs.

This software is coded so efficiently that everything I use on my Linux machines can nearly fit onto a single CD; you’d need shelves of CDs to contain Windows or Windows Office. It can run more efficiently on smaller and older computers than Windows can, and run longer on them as they age. A nonprofit in Portland (called Free Geek) for years has been reconditioning old and small-capacity computers, outfitting them with Linux, and sending them to local nonprofits and to underdeveloped countries around the globe; those machines are great for education, and they cost a pittance. Open source runs faster, with fewer errors, and is nearly impervious to viruses, worms and the like. (No need for expensive anti-virus software.) The main area where Windows and Mac’s OS X clearly surpass it is in the realm of computer games. One of the main world headquarters for open source development is the Pacific Northwest; the original developer of Linux, a Finn named Linus Torvalds, lives outside Portland.

Another educational point relating to open source: Tech-oriented students could actually take the lead in setting up computer systems and wireless networks around the schools.

Is this news to you? (Was it ever considered by the Department of Education?) Here’s something Linux and open source don’t have: A huge marketing budget underwritten by a massive corporation. There are several fair-sized companies developing variations (called “distributions”) of Linux, and profitable spinoffs, but most people on the street have never heard of them.

If they had, you wonder what they might think on reflection about the state of Idaho’s new contract.

http://www.dailyfinance.com/2012/10/23/is-hewlett-packard-one-of-the-dows-best-brands/
Is Hewlett-Packard One of the Dow’s Best Brands?
What’s in a brand? Any investor who follows the Dow Jones Industrial Average  knows how important a strong brand can be — and how damaging it is when a company’s brand becomes tarnished. The index has undergone many changes over the years, and many of these changes were enacted in response to the diminished value of one brand or the strengthening of another.

When the automobile became a common sight on city roads, the Dow responded by adding the strongest auto manufacturers to its exclusive list. The rise of a consumer culture prompted the Dow’s inclusion of the most popular department stores. Companies that developed and marketed advanced technology have found a place in the Dow’s ranks in every era from the Electric Age onward. Branding mattered then, and it matters even more today.

Today, we’ll be taking a look at the brand behind Hewlett-Packard (NYS: HPQ) , a Dow component since 1997 and Interbrand’s 15th-most valuable global brand of 2012, to better understand how it was built and how it has helped create one of the world’s largest companies.

Building brand value
Thanks to a decade’s worth of data from the Interbrand consulting firm, we can analyze HP’s branding successes (or failures) over the past 10 years relative to some more standard corporate measures. We’ll also dive into some of HP’s pivotal public moments to see how those moments helped build a brand to stand the test of time.
 get photo

Over the last decade, HP’s market cap has dwindled by 57%. Its annual revenue (with its most recent trailing-12-month revenue serving as 2012’s result) has grown by 68%. The company’s latest brand value is 31% greater than it was a decade ago.

The discrepancies between brand value, revenue, and market cap are surprisingly large — particularly considering that HP’s image as a doddering dinosaur took shape a long time before Interbrand’s relatively mild downgrade this year. Revenue growth has not been matched by bottom-line gains, which were little-changed for years before plummeting in 2012 as a result of various charges and writedowns.

Behind the brand
Interbrand points out that HP’s game of CEO musical chairs has resulted in "internal instability [that] has resulted in the lack of a cohesive business strategy or brand strategy, which threatens both financial results and HP’s reputation." That’s a bit of an understatement. Interbrand also dings HP for its imminent fall from the top of global PC sales rankings — which Lenovo seems all but certain to claim within the next year — and for its too-slow, too-sloppy approach to growing its enterprise services business in a bid to become the next IBM (NYS: IBM) . With respect to the brand, the Meg Whitman era is starting to come together with HP’s "Make it Matter" campaign, but the company has a long way to go to win over consumers it has lost over the course of many missteps in the last few years.

HP has a deep well of brand history to draw from, should it wish to highlight its commitment to innovation on either the consumer side or the enterprise side. HP, in a sense, is Silicon Valley: It was the original garage-founded tech start-up in Northern California. It was also the first company to market a "personal computer" when consumer PCs weren’t even a glimmer in IBM’s eye. Unfortunately, highlighting a storied history in the middle of a difficult transition period might only serve to make consumers more aware of HP’s failures to live up to that history. Technology doesn’t leave much room for nostalgia.

HP has been integral in pushing the adoption of consumer technology, especially low-cost printers, but it doesn’t have grand stories the way IBM or Apple (NAS: AAPL) or Microsoft (NAS: MSFT) do. That gives its brand less of a cushion against changing trends, as there’s little brand value in being a low-cost PC manufacturer in a post-PC era. Some members of HP’s own executive team apparently see little value in their company’s products. Executive chairman Ray Lane foolishly (small "F") allowed himself to be photographed while using a MacBook, an expression of childlike joy plastered across his face. While most consumers will never see the picture, its existence serves to diminish the brand as long as HP continues to compete with Apple in the laptop market.

Meanwhile, HP continues to fall behind in mobile, an arena into which it has failed to release any remotely successful devices and which it has all but exited after divesting its Palm operating system. The longer HP sticks with its PC manufacturing business, the harder it will be to make that transition, especially considering the intense mobile competition between Apple on the high end and numerous devices running Google’s (NAS: GOOG) Android on the low-to-middle range of the market. At least HP is ahead of Dell (NAS: DELL) in the mobile curve, but that’s a bit like winning a bicycle race against a man with no tires. Dell’s founder is on the record as rejecting a smartphone foray, leaving it to compete with HP in a difficult Windows 8 tablet market.

Another major blemish on HP’s brand is its decision to cut 27,000 jobs, which reflects poorly in a time when jobs are foremost on everyone’s mind. It may be necessary to get costs under control, but that doesn’t make it a good move in the eyes of consumers. If anything, HP is one global brand that Interbrand may be overly generous with. It would be shocking if the company’s brand value didn’t drop significantly in Interbrand’s 2013 report.

Stay ahead of the curve
HP’s fortunes are closely tied to Microsoft’s, as the PC maker relies on Windows for its consumer devices and will compete with Microsoft in enterprise software services. Microsoft’s fortunes may wind up being the key to all PC-era companies in the post-PC era, which is why the Fool has assembled a team of our best tech analysts to cover the company for our exclusive premium research service. Does Microsoft have what it takes to force PC dinosaurs to evolve? You can find out when you subscribe to our Microsoft research reports today.

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October 30, 2012 at 8:49 AM