Why McDonald’s Can’t Save Itself – They Myth of Core

Why McDonald’s Can’t Save Itself – They Myth of Core

McDonald’s just had another lousy quarter.  All segments saw declining traffic, revenues fell 11%.  Profits were off 33%.  Pretty well expected, given its established growth stall.

A new CEO is in place, and he announced is turnaround plan to fix what ails the burger giant.  Unfortunately, his plan has been panned by just about everyone. Unfortunately, its a “me too” plan that we’ve seen far too often – and know doesn’t work:

  1. Reorganize to cut costs.  By reshuffling the line-up, and throwing out a bunch of bodies management formerly said were essential, but now don’t care about, they hope to save $300M/year (out of a $4.5B annual budget.)
  2. Sell off 3,500 stores McDonald’s owns and operate (about 10% of the total.)  This will further help cut costs as the operating budgets shift to franchisees, and McDonald’s book unit sales creating short-term, one-time revenues into 2018.
  3. Keep mucking around with the menu.  Cut some items, add some items, try a bunch of different stuff.  Hope they find something that sells better.
  4. Try some service ideas in which nobody really shows any faith, like adding delivery and/or 24 hour breakfast in some markets and some stores.

McDonalds burger and friesNeedless to say, none of this sounds like it will do much to address quarter after quarter of sales (and profit) declines in an enormously large company.  We know people are still eating in restaurants, because competitors like 5 Guys, Meatheads, Burger King and Shake Shack are doing really, really well.  But they are winning primarily because McDonald’s is losing.  Even though CEO Easterbrook said “our business model is enduring,” there is ample reason to think McDonald’s slide will continue.

Possibly a slide into oblivion.  Think it can’t happen?  Then what happened to Howard Johnson’s?  Bob’s Big Boy? Woolworth’s?  Montgomery Wards? Size, and history, are absolutely no guarantee of a company remaining viable.

In fact, the odds are wildly against McDonald’s this time.  Because this isn’t their first growth stall.  And the way they saved the company last time was a “fire sale” of very valuable growth assets to raise cash that was all spent to spiffy up the company for one last hurrah – which is now over.  And there isn’t really anything left for McDonald’s to build upon.

Go back to 2000 and McDonald’s had a lot of options.  They bought Chipotle’s Mexican Grill in 1998, Donato’s Pizza in 1999 and Boston Market in 2000.  These were all growing franchises.  Growing a LOT faster, and more profitably, than McDonald’s stores.  They were on modern trends for what people wanted to eat, and how they wanted to be served.  These new concepts offered McDonald’s fantastic growth vehicles for all that cash the burger chain was throwing off, even as its outdated yellow stores full of playgrounds with seats bolted to the floors and products for 99cents were becoming increasingly not only outdated but irrelevant.

But in a change of leadership McDonald’s decided to sell off all these concepts.  Donato’s in 2003, Chipotle went public in 2006 and Boston Market was sold to a private equity firm in 2007.  All of that money was used to fund investments in McDonald’s store upgrades, additional supply chain restructuring and advertising. The “strategy” at that time was to return to “strategic focus.”  Something that lots of analysts, investors and old-line franchisees love.

But look what McDonald’s leaders gave up via this decision to re-focus.  McDonald’s received $1.5B for Chipotle.  Today Chipotle is worth $20B and is one of the most exciting fast food chains in the marketplace (based on store growth, revenue growth and profitability – as well as customer satisfaction scores.)  The value of all of the growth gains that occurred in these 3 chains has gone to other people.  Not the investors, employees, suppliers or franchisees of McDonald’s.

We have to recognize that in the mid-2000s McDonald’s had the option of doing 180degrees opposite what it did.  It could have put its resources into the newer, more exciting concepts and continued to fidget with McDonald’s to defend and extend its life even as trends went the other direction.  This would have allowed investors to reap the gains of new store growth, and McDonald’s franchisees would have had the option to slowly convert McDonald’s stores into Donato’s, Chipotle’s or Boston Market.  Employees would have been able to work on growing the new brands, creating more revenue, more jobs, more promotions and higher pay.  And suppliers would have been able to continue growing their McDonald’s corporate business via new chains.  Customers would have the benefit of both McDonald’s and a well run transition to new concepts in their markets.  This would have been a win/win/win/win/win solution for everyone.

But it was the lure of “focus” and “core” markets that led McDonald’s leadership to make what will likely be seen historically as the decision which sent it on the track of self-destruction.  When leaders focus on their core markets, and pull out all the stops to try defending and extending a business in a growth stall, they take their eyes off market trends.  Rather than accepting what people want, and changing in all ways to meet customer needs, leaders keep fiddling with this and that, and hoping that cost cutting and a raft of operational activities will save the business as they keep focusing ever more intently on that old core business.  But, problems keep mounting because customers, quite simply, are going elsewhere.  To competitors who are implementing on trends.

The current CEO likes to describe himself as an “internal activist” who will challenge the status quo.  But he then proves this is untrue when he describes the future of McDonald’s as a “modern, progressive burger company.”  Sorry dude, that ship sailed years ago when competitors built the market for higher-end burgers, served fast in trendier locations.  Just like McDonald’s 5-years too late effort to catch Starbucks with McCafe which was too little and poorly done – you can’t catch those better quality burger guys now.  They are well on their way, and you’re still in port asking for directions.

McDonald’s is big, but when a big ship starts taking on water it’s no less likely to sink than a small ship (i.e. Titanic.)  And when a big ship is badly steered by its captain it flounders, and sinks (i.e. Costa Concordia.)  Those who would like to think that McDonald’s size is a benefit should recognize that it is this very size which now keeps McDonald’s from doing anything effective to really change the company.  Its efforts (detailed above) are hemmed in by all those stores, franchisees, commitment to old processes, ingrained products hard to change due to installed equipment base, and billions spent on brand advertising that has remained a constant even as McDonald’s lost relevancy. It is now sooooooooo hard to make even small changes that the idea of doing more radical things that analysts are requesting simply becomes impossible for existing management.

And these leaders, frankly, aren’t even going to try.  They are deeply wedded, committed, to trying to succeed by making McDonald’s more McDonald’s.  They are of the company and its history.  Not the CEO, or anyone on his team, reached their position by introducing a revolutionary new product, much less a new concept – or for that matter anything new.  They are people who “execute” and work to slowly improve what already exists. That’s why they are giving even more decision-making control to franchisees via selling company stores in order to raise cash and cut costs – rather than using those stores to introduce radical change.

These are not “outside thinkers” that will consider the kinds of radical changes Louis V. Gerstner, a total outsider, implemented at IBM – changing the company from a failing mainframe supplier into an IT services and software company.  Yet that is the only thing that will turn around McDonald’s.  The Board blew it once before when it sold Chipotle, et.al. and put in place a core-focused CEO.  Now McDonald’s has fewer resources, a lot fewer options, and the gap between what it offers and what the marketplace wants is a lot larger.

Hewlett Packard’s Musical Chairs Game

Hewlett Packard’s Musical Chairs Game

Hewlett Packard is splitting in two.  Do you find yourself wondering why?  You aren’t alone.

Hewlett Packard is nearly 75 years old.  One of the original “silicone valley companies,” it started making equipment for engineers and electronic technicians long before computers were every day products.  Over time HP’s addition of products like engineering calculators moved it toward more consumer products.  And eventually HP became a dominant player in printers.  All of these products were born out of deep skills in R&D, engineering and product development.  HP had advantages because its products were highly desirable and unique, which made it nicely profitable.

But along came a CEO named Carly Fiorina, and she decided HP needed to grow much bigger, much more quickly.  So she bought Compaq, which itself had bought Digital Equipment, so HP could sell Wintel PCs.  PCs were a product in which HP had no advantage. PC production had always been an assembly operation of other companies’ intellectual property.  It had been a very low margin, brutally difficult place to grow unless one focused on cost lowering rather than developing intellectual capital.  It had nothing in common with HP’s business.

HP laptop

To fight this new margin battle HP replaced Ms. Fiorina with Mark Hurd, who recognized the issues in PC manufacturing and proceeded to gut R&D, product development and almost every other function in order to push HP into a lower cost structure so it could compete with Dell, Acer and other companies that had no R&D and cultures based on cost controls.  This led to internal culture conflicts, much organizational angst and eventually the ousting of Mr. Hurd.

But, by that time HP was a company adrift with no clear business model to help it have a sustainably profitable future.

Now HP is 4 years into its 5 year turnaround plan under Meg Whitman’s leadership.  This plan has made HP much smaller, as layoffs have dominated the implementation.  It has weakened the HP brand as no important new products have been launched, and the gutted product development capability is still no closer to being re-established.  And PC sales have stagnated as mobile devices have taken center stage – with HP notably weak in mobile products.  The company has drifted, getting no better and showing no signs of re-developing its historical strengths.

So now HP will split into two different companies.  Following the old adage “if you can’t dazzle ’em with brilliance, baffle ’em with bulls**t.”  When all else fails, and you don’t know how to actually lead a company, then split it into pieces, push off the parts to others to manage and keep at least one CEO role for yourself.

Let’s not forget how this mess was created.  It was a former CEO who decided to expand the company into an entirely different and lower margin business where the company had no advantage and the wrong business model.  And another that destroyed long-term strengths in innovation to increase short-term margins in a generic competition.  And then yet a third who could not find any solution to sustainability while pushing through successive rounds of lay-offs.

This was all value destruction created by the persons at the top.  “Strategic” decisions made which, inevitably, hurt the organization more than helped it.  Poorly thought through actions which have had long-term deleterious repercussions for employees, suppliers, investors and the communities in which the businesses operate.

The game of musical chairs has been very good for the CEOs who controlled the music.  They were paid well, and received golden handshakes.  They, and their closest reports, did just fine.  But everyone else….. well…..

Ballmer Resigning – Next?

Steve Ballmer announced he would be retiring as CEO of Microsoft within the next 12 months.  This extended timing, rather than immediately, shows clear the Board is ready for him to go but there is nobody ready to replace him. 

The big question is, who would want Ballmer's job?   It will be very tough to make Microsoft an industry leader again.  What would his replacement propose to do?  The fuse for a turnaround is short, and the options faint.

Microsoft has been on a downhill trajectory for at least 4 years.  Although the company has introduced innovations in gaming (xBox and Kinect) as well as on-line (games and Bing), those divisions perpetually lose money.  Stiff competitors Sony, Nintendo and Google have made these forays intellectually  interesting, but of no value for investors or customers.  The end-game for Microsoft has remained Windows – and as PC sales decline that's very bad news.

Microsoft viability has been firmly tied to Windows and Office sales.  Historically these have been unassailable products, creating over 100% of the profits at Microsoft (covering losses in other divisions.) But, these products have lost growth, and relevancy. Windows 8 and Office 365 are product nobody really cares about, while they keep looking for updates from Apple, Google, Amazon and Samsung.

The market started going mobile 10 years ago.  As Apple and Google promoted increased mobility, Microsoft tried to defend & extend its PC stronghold.  It was a classic business inflection point in the making.  Everyone knew at some point mobile devices would be more important than PCs.  But most industry insiders (including Microsoft) kept thinking it would be later rather than sooner. 

They were wrong.  The shift came a lot faster than expected.  Like in sailboat racing, suddenly the wind was taken out of Microsoft's sails as competitors shot to the lead in customer interest.  While people were excited for new smartphones and tablets, Microsoft tried to re-engineer its historical product as an extension into the new market.

Windows 8 tablets and Surface tablets were ill-fated from the beginning.  They did not appeal to the huge installed base of Windows customers, because changes like touch screens and tiles simply were too expensive and too behaviorally different.  And they offered no advantage for people to switch that had already started buying iOS and Android products.  Not to mention an app availability about 10% of the market leaders.  Simply put, investing in Windows 8 and its own tablet was like adding bricks to a downhill runaway truck (end-of-life for PCs) – it sped up the time to an inevitable crash. 

And spending money on poorly thought out investments like the Barnes & Noble Nook merely demonstrated Microsoft had money to burn, rather than a strategy for competing.  Skype cost some $8B, but how has that helped Microsoft become more competive?  It's not just an overspending on internal projects that failed to achieve any market success, but a series of wasted investments in bad acquisitions that showed Microsoft had no idea how it was going to regain industry leadership in a changing marketplace going more mobile and into the cloud every month.

Now the situation is pretty dire, and now is the time for Microsoft to give up on its defend and extend strategy for Windows/Office.  Customers are openly uninterested in new laptops running Windows 8.  And Win 8.1 will not change this lackadaisical attitude.  Nobody is interested in Windows 8 phones, or tablets.  This has left companies in the Microsoft ecosystem like HP, Dell and Nokia gasping for air as sales tumble, profits evaporate and customers flock to new solutions from Apple and Samsung.  Instead of seeking out an update to Office for a new PC, people are using much lighter (and cheaper) cloud services from Amazon and office solutions like Google docs.  And most of those old add-on product sales, like printers and servers, are disappearing into the cloud and mobile displays.

So now, after being forced to write off Surface and report a  horrible quarter, the Board has pushed Ballmer out the door.  Pretty remarkable.  But, incredibly late.  Just like the leaders at RIM stayed too long, leaving the company with no future options as Blackberry sales plummeted, Ballmer is taking leave as sales, profits and cash flow are taking a turn for the worst.  And only months after a reorganization that simply made the whole situation a lot more confusing for not only investors, but internal managers and employees.

Microsoft has a big cash hoard, but how long will that last?  As its distribution system falters, and sales drop, the costs will rapidly catch up with cash flow.  Big layoffs are a certainty; think half the workforce in 2 years. Equally certain are sales of divisions (who can buy xBox market share and turn it competitively profitable?) or shut-downs (how long will Bing stay alive when it is utterly unnecessary and expensive to maintain?) 

But, there is a better option.  Without the cash from
Windows/Office, you can't keep much of the rest of Microsoft walking. So
now is the time to cut investments in Windows/Office and put money into the
best things Microsoft has going – primarily Kinect and cloud services.  A radical restructuring of its spending and investments.

Kinect is an incredible product.  It has found multiple applications Microsoft fails to capitalize upon.  Kinect has the possibility of becoming the centerpiece for managing how we connect to data, how we store data, how we find data.  It can bring together our smartphone, tablet and historical laptop worlds – and possibly even connect this to traditional TV and radio.  It can be the centerpiece for two-way communications (think telephone or skype via all your devices.)  Coupled with the right hardware, it can leapfrog iTV (which we still are waiting to see) and Cisco simultaneously. 

In cloud services it will take a lot to compete with leaders Amazon, IBM, Apple and Google.  They have made big investments, and are far in front.  But, this is the bread-and-butter market for Microsoft.  Millions of small businesses that want easy to use BYOD (bring your own device) environment, and easy access to data, documents and functionality for IT, like guaranteed data back-up and uptime, and user functionality like all those apps.  These customers have relied on Microsoft for these kind of services for years, and would enjoy a services provider with an off-the-shelf product they can implement easily and cheaply that supports all their needs.  Expensive to develop, but a growing market where Microsoft has a chance to leapfrog competitors.

As for Bing, give it to Yahoo – if Marissa Mayer will take it.  Stop the bloodletting and get out of a market where Microsoft has never succeeded.  Bing is core to Yahoo's business.  If you can trade for some Yahoo stock, go for it.  Let Yahoo figure out how to sell content and ads, while Microsoft refocuses on the new platform for 2017; from the user to the infrastructure services.

Strong leaders have their benefits.  But, when they don't understand market shifts, and spend far too long trying to defend & extend past markets, they can put their organizations in terrible jeopardy of total failure.  Ballmer leaves no with clear replacement, nor with any vision in place for leapfrogging competitors and revitalizing Microsoft. 

So it is imperative the new leader provide this kind of new thinking.  There are trends developing that create future scenarios where Microsoft can once again be a market leader.  And it will be the role of the new CEO to identify that vision and point Microsoft's investments in the right direction to regain viability by changing the game on the current winners.

 

Don’t Buy Yahoo – At Least Not Yet

With great public fanfare Yahoo hired a Google executive as CEO this week. 

The good news is that by all accounts Ms. Marissa Mayer is very hard working, very smart and deeply knowledgeable about all things internet.  Ms. Mayer also was extremely successful at Google, which is a powerful recommendation for her skills.  This has pleased a lot of people.  Some have practically gushed with excitement, and have already determined this is a pivotal event destined to save Yahoo.

But, before we get carried away with ourselves, there are plenty of sound reasons to remain skeptical.  Check out this chart, and I concur completely with originator Jay Yarow of Business Insider – the #1 problem at Yahoo is revenue growth:

Yahoo revenue growth 7-2012
Source:  BusinessInsider.com reproduced with permission of Jay Yarow

Let's not forget, this problematic slide occurred under the last person who had great tech industry credentials, deep experience and a ton of smarts; Carol Bartz.  She was the last Yahoo CEO who was brought in with great fanfare and expectations of better things after being the wildly successful CEO of AutoCad.  Only things didn't go so well and she was unceremoniously fired amidst much acrimony.

So, like they say on financial documents, past performance is not necessarily an indicator of future performance.

What Yahoo needs is to become relevant again.  It has lost the competition in search, and search ads, to Google.  It is not really competitive in banner ads with leader Facebook, and strong competitor Google.  It is no longer leads in image sharing which has gone to Pinterest.  It has no game in local coupons and marketing which is being driven by GroupOn and Yelp.  For a company that pioneered the internet, and once led in so many ways, Yahoo has lost relevancy as new entrants have clobbered it on all fronts. 

Because it has fallen so far behind, it is ridiculous to think Yahoo will catch up and surpass the industry leaders in existing markets.  No CEO, regarless of their historical success and skills, can pull off that trick.  The only hope for Yahoo is to find entirely new markets where it can once again pioneer new solutions that do not go head-to-head with existing leaders.  Yahoo must meet emerging, unmet needs in new ways with new, innovative solutions that it can ride to success.  Like the turn to mobile that saved the nearly dead Mac-centric Apple in 2000.  Or the change to services from hardware that saved IBM in the 1990s.

Ms. Mayer's entire working career was at Google, so it is worth looking into Google's experience to see if that gives us indications of what Ms. Mayer may do.

Unfortunately, Google has been really weak at implementing new solutions which create high revenue, new markets.  Google has been a wild success at search, its first product, which still generates 90% of the company's revenue. 

  • Android is a very important mobile operating system.  But unfortunately giving away the product has done nothing to help sales and profits at Google.  Yahoo certainly cannot afford to develop something so sophisticated and give it away.
  • To try turning around the Android sales and profits Google bought market laggard Motorola Mobility for $12.5B.  With a total market cap of only $19.2B Yahoo is in no position to attempt buying its way out of trouble.
  • Chrome is a great product that has selectively won several head-to-head battles with other application environments.  However, again, it has not created meaningful revenues.  Despite a big investment.
  • Google+ has its advocates, but it was at least 3 years late to market allowing Facebook to develop a tremendous lead.  So far the product is still far behind in its gladiator battle with FB, and produces little revenue despite the enormous development and launch costs – which are still draining resources from Google.
  • Google has invested in an exciting, self-driving automobile.  But nobody knows when, or if, it will be sold.  So far, money spent and no plan for a return.
  • Google glasses are cool.  But the revenue model?  Launch date?  Manufacturing and distribution partners for commercialization?
  • Google innovated a number of exciting potential product markets, but because it failed at market implementation eventually it simply killed them.  Remember Wave?  Powermeter? Picnik? Google Checkout?  Google answers? Google Buzz? Fast Flip? Google Lively? Squared? 

If ever a company proved that there is a difference between innovating new products and launching successfully to create new markets  it has to be Google.

So is Yahoo destined to fail?  No.  As previously mentioned, Apple and IBM both registered incredibly successful turnarounds.  Bright people with flexible minds and leadership skills can do incredible things.  But it will be up to Ms. Mayer to actually shed some of that Google history – fast.

At Google Ms. Mayer was employee #20 on a veritable rocket ship.   The challenge at Google was to keep being better and better at search, and ads associated with search.  And developing products, like GMail, that continued to tie people to Google search.  It was hard work, but it was all about making Google better at what it had always done, executing sustaining innovations to keep Google ahead in a rapidly growing marketplace.

Yahoo is NOT Google, and has a very different set of needs.  

Yahoo is in far worse shape now than when Ms. Bartz came in as the technical wonderkind to turn it around last time. Ms. Mayer takes the reigns of a company going in the wrong direction (losing revenues) with fewer people, fewer resources, weaker market position on its primary products and a weakening brand.   Hopefully she's as smart as many people say she is and acts quickly to find those new markets with products fulfilling unmet needs.  Or she's likely to end up turning out the lights at the company where Ms. Bartz dimmed them significantly.

Will Meg Whitman’s Layoffs Turn Around HP? Nope

Things are bad at HP these days.  CEO and Board changes have confused the management team and investors alike.  Despite a heritage based on innovation, the company is now mired in low-growth PC markets with little differentiation.  Investors have dumped the stock, dropping company value some 60% over two years, from $52/share to $22 – a loss of about $60billion. 

Reacting to the lousy revenue growth prospects as customers shift from PCs to tablets and smartphones, CEO Meg Whitman announced plans to eliminate 27,000 jobs; about 8% of the workforce.  This is supposedly the first step in a turnaround of the company that has flailed ever since buying Compaq and changing the company course into head-to-head PC competition a decade ago.  But, will it work? 

Not a chance.

Fixing HP requires understanding what went wrong at HP.  Simply, Carly Fiorina took a company long on innovation and new product development and turned it into the most industrial-era sort of company.  Rather than having HP pursue new technologies and products in the development of new markets, like the company had done since its founding creating the market for electronic testing equipment, she plunged HP into a generic manufacturing war.

Pursuing the PC business Ms. Fiorina gave up R&D in favor of adopting the R&D of Microsoft, Intel and others while spending management resources, and money, on cost management.  PCs offered no differentiation, and HP was plunged into a gladiator war with Dell, Lenovo and others to make ever cheaper, undifferentiated machines.  The strategy was entirely based upon obtaining volume to make money, at a time when anyone could buy manufacturing scale with a phone call to a plethora of Asian suppliers.

Quickly the Board realized this was a cutthroat business primarily requiring supply chain skills, so they dumped Ms. Fiorina in favor of Mr. Hurd.  He was relentless in his ability to apply industrial-era tactics at HP, drastically cutting R&D, new product development, marketing and sales as well as fixating on matching the supply chain savings of companies like Dell in manufacturing, and WalMart in retail distribution. 

Unfortunately, this strategy was out of date before Ms. Fiorina ever set it in motion.  And all Mr. Hurd accomplished was short-term cuts that shored up immediate earnings while sacrificing any opportunities for creating long-term profitable new market development.  By the time he was forced out HP had no growth direction.  It's PC business fortunes are controlled by its suppliers, and the PC-based printer business is dying.  Both primary markets are the victim of a major market shift away from PC use toward mobile devices, where HP has nothing.

HPs commitment to an outdated industrial era supply-side manufacturing strategy can be seen in its acquisitions.  What was once the world's leading IT services company, EDS, was bought in 2008 after falling into financial disarray as that market shifted offshore.  After HP spent nearly $14B on the purchase, HP used that business to try defending and extending PC product sales, but to little avail.  The services group has been downsized regularly as growth evaporated in the face of global trends toward services offshoring and mobile use.

In 2009 HP spent almost $3B on networking gear manufacturer 3Com.  But this was after the market had already started shifting to mobile devices and common carriers, leaving a very tough business that even market-leading Cisco has struggled to maintain.  Growth again stagnated, and profits evaporated as HP was unable to bring any innovation to the solution set and unable to create any new markets.

In 2010 HP spent $1B on the company that created the hand-held PDA (personal digital assistant) market – the forerunner of our wirelessly connected smartphones – Palm.  But that became an enormous fiasco as its WebOS products were late to market, didn't work well and were wholly uncompetitive with superior solutions from Apple and Android suppliers.  Again, the industrial-era strategy left HP short on innovation, long on supply chain, and resulted in big write-offs.

Clearly what HP needs is a new strategy.  One aligned with the information era in which we live.  Think like Apple, which instead of chasing Macs a decade ago shifted into new markets.  By creating new products that enhanced mobility Apple came back from the brink of complete failure to spectacular highs.  HP needs to learn from this, and pursue an entirely new direction.

But, Meg Whitman is certainly no Steve Jobs.  Her career at eBay was far from that of an innovator.  eBay rode the growth of internet retailing, but was not Amazon.  Rather, instead of focusing on buyers, and what they want, eBay focused on sellers – a classic industrial-era approach.  eBay has not been a leader in launching any new technologies (such as Kindle or Fire at Amazon) and has not even been a leader in mobile applications or mobile retail. 

While CEO at eBay Ms. Whitman purchased PayPal.  But rather than build that platform into the next generation transaction system for web or mobile use, Paypal was used to defend and extend the eBay seller platform.  Even though PayPal was the first leader in on-line payments, the market is now crowded with solutions like Google Wallets (Google,) Square (from a Twitter co-founder,) GoPayment (Intuit) and Isis (collection of mobile companies.) 

Had Ms. Whitman applied an information-era strategy Paypal could have been a global platform changing the way payment processing is handled.  Instead its use and growth has been limited to supporting an historical on-line retail platform.  This does not bode well for the future of HP.

HP cannot save its way to prosperity.  That never works.  Try to think of one turnaround where it did – GM? Tribune Corp? Circuit City? Sears?  Best Buy? Kodak?  To successfully turn around HP must move – FAST – to innovate new solutions and enter new markets.  It must change its strategy to behave a lot more like the company that created the oscilliscope and usher in the electronics age, and a lot less like the industrial-era company it has become – destroying shareholder value along the way.

Is HP so cheap that it's a safe bet.  Not hardly.  HP is on the same road as DEC, Wang, Lanier, Gateway Computers, Sun Microsystems and Silicon Graphics right now.  And that's lousy for investors and employees alike.