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Friday, June 10, 2005

Some perspective on HPQ

Just to put into perspective how much value I think HPQ is destroying, read this article on how much money HPQ just spent on severance (short answer: $236 million). Those kinds of figures boggle my mind. Think about the alternative uses for $236 million other than compensating all of the people who are deemed unworthy to continue to move HP forward. For instance, you could give 10 small, growth technology companies $23.6 million a piece for development and growth initiatives. Heck, structure it as equity and you'd like get over a 50% stake in each one. Think about it, HPQ could have bought vast majority stakes in 10 companies that have technology that is currently viable but just needs growth capital. One could go even further and say that HPQ could seed fund 100 companies with $2.36 million a piece. HPQ could've created a portfolio of 100 small start-ups that could be creating the next big thing 10 years from now.
But no, they spent $236 million firing people they hired. I don't think HPQ investors realize just how painful (or how long) an extensive, fundamental turnaround is. However, the more HPQ spends on severance, the more they'll find that out.


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