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B&E This Fortnight
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Inbox : This Fortnight

Issue Date - 13/10/2011
Meg in, leo out!

When Leo Apotheker was named CEO of HP in October last year, there were doubts about whether a the former CEO of a software company (SAP) would ever be able to handle a mix of hardware and software at the world’s largest IT company (in terms of topline) as the CEO. After analysing the situation and his competencies, B&E did a story titled, “Wrong person. Wrong place” (issue dated November 11, 2010), in which we concluded that “The new CEO is a software guy and has prior experience only in enterprise sales – A clear mismatch with the current philosophy of HP – the largest IT company in the world”. When he announced his decision to sell off HP’s hardware division and buy out Autonomy for $11.69 billion in the last week of August 2011, we ran a follow-up story titled, “Is Apotheker destroying HP?” (issue dated September 15, 2011). This was our claim: “Apotheker, had little clue about what could potentially be done with a PC-plus-services portfolio. Post sell-off of the PSG unit, the company stands to lose $400.74 billion in expected revenue earnings over the next 20 years (arrived at using a binomial regression forecast model; R2=0.99; Eqn: y = -37.75x2 - 1395x + 42154).” The expected followed. Apotheker was booted out of the company. HP’s Board confirmed this publicly on September 22, 2011.

First question: Did he really deserve the bullet so soon? Actually, Apotheker has done enough in 9 months than what humans are usually capable of. Under him, HP’s m-cap shrunk to $47.52 billion – a fall of 51.52% since he took over!

Interestingly, the very moment the Board announced Apotheker’s exit, they pulled out another “typically-HP Board” trick. Former CEO of eBay Meg Whitman, with no prior experience in the field of hardware, was handed over the crown.

This brings us to the second question: Is a lady, who in the past four years was known only for two less-than-glorious acts – she resigned as eBay’s CEO in 2007 and then unsuccessfully ran for the office of the Governor of California (after spending $322.5 million in election campaigns) – fit to become the CEO of the world’s largest IT firm? Apparently, she is a fast learner. And what HP needs right now is someone with a vision. Remember, it was her vision that made eBay buy Skype for an inflated $4.1 billion in cash in 2005 (and which was later sold at $2.75 billion in 2009). But at least a move like this will keep HP’s hardware and software units going for some years! Apotheker destroyed more than 51% of HP’s m-cap in less than a year. How long will Whitman take to wipe out the rest? Difficult to say. But, if she manages to convince the HP Board to eat its own words and retain the hardware and mobility units (with webOS), she would have scored a one on ten to begin with in our books.

BNP Paribas’ $96 billion asset sale

BNP Paribas’ $96 billion asset sale In a move to insulate itself from the impact of the Greek debt crisis, BNP Paribas, the largest French bank, plans to sell $96 billion of risk-weighted assets to allay investor fears about the bank’s leverage and funding. The bank will also reduce its US dollar funding needs by $60 billion by the end of 2012. Unlike some of its main rivals like Société Générale and Crédit Agricole, BNP has been lucky to escape Moody’s Investors Service’s review without a change in rating. But that’s not a long-term remedy as the agency said it would extend its review for a possible downgrade of BNP’s long-term debt and deposit ratings. The bank in a statement on its website said the asset sales would reduce its balance sheet by around 10%. Of late, leading French banks have been fighting to restore confidence after suffering a summer of sell-off by investors, as they feared the banks are ill equipped to cope with the fallout from a Greek debt default. It’s not that BNP has been alone. Even smaller rival Société Générale unveiled a similar plan after post talks of a possible Moody’s downgrade. By selling assets, BNP will be in shape to reach a core Tier 1 ratio of 9% by Jan. 01, 2013, under the new Basel III regime, which calls for more stringent capital requirements.

Intel’s android affair
After taking over the responsibility of developing the MeeGo platform for Nokia, Intel is further expanding its base in to the booming mobile processing space. Intel Corp. and Google Inc. recently launched a development partnership to optimise future versions of Google’s Android mobile software for Intel’s “Atom” processors. The idea is to speed the development and of future Intel-powered smartphones. The first of Android phones equipped with Intel chips should be available by the first half of 2012. Intel, the world’s No. 1 maker of PC microprocessors, has struggled to gain strong foothold in the smartphones and tablets space. With this partnership, Intel aims to reverse the trend, as Android is currently the biggest and fastest growing mobile operating system, ahead of Apple iOS, RIM’s OS, and Microsoft. Many of the smartphone manufacturers have been using the highly popular ARM chipset so far. It would be interesting to see how the Intel-Google partnership will help the two firms and impact ARM.


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