Chasing EPS. Is it profitable to be innovative?
On Monday, March 2, I received it information on the acquisition of Aruba Networks by HP. The transaction, valued at $ 2.7 billion, is designed to strengthen HP's position in the wireless network solutions market. In this way, HP will become the No. 2 player after Cisco Systems, which is the undisputed leader in the global market. Currently, Cisco has a 52% share in WLAN sales, Aruba 13% and HP just over 4%.
The question is whether HP will be able to take advantage of the transaction opportunities since it failed to do so in previous WLAN acquisitions - Colubris in 2008 and 3Com in 2010. Another question is that Aruba is a supplier to HP competitors such as Dell. Brocade or Juniper. Will these companies continue to buy WLANs from Aruba while it is owned by HP? Nevertheless, we can say with certainty that a new strong competitor, HP-Aruba, has emerged behind Cisco's back, and with the estimated 40% WLAN market growth until 2019, Cisco's share of sales will decline in the coming years.
The history of acquisitions made by HP and Cisco.
Until a few years ago, Hewlett-Packard Development Company, LP used the name hp-invent to emphasize the innovative nature of its business. Can large corporations still be innovative? The history of acquisitions of companies such as Cisco, HP, IBM shows that it is simply cheaper to buy competition with products, patents and customers than to conduct costly research yourself. I recommend an interesting article about IBM, which in pursuit of EPS (Earn per Share), to please the shareholders it gets rid of its greatest strengths. In turn, the president of Cisco Systems, John Chambers, was accused passivity and lack of development vision.
I dare say that similar processes are taking place in other large American corporations that have lost the freshness and energy of their founders and founders. We perfectly associate Jeff Bezos with Amazon, Larry Ellison from Oracle, Bill Gates from Microsoft, Steve Jobs from Apple and Sergey Brin from Google. We see the potential of these companies and the determination of their owners.
The name Hewlett-Packard comes from the names of the late founders of the company. Their pioneering history began in 1939 in Palo Alto, California (of course in a garage). Their company is now run by undoubtedly brilliant and expensive hired managers who, however, do not necessarily share the passions of Bill Hewlett and David Packard. One of HP's previous CEOs was called by the employees of an accountant!
At the end of my post, interesting statistics. According to WIPO data (World Intellectual Property Organization) in 2013, 2.57 million patent applications were filed worldwide, of which 32.1% is for China (!), 22.3% is the United States, 12.8% Japan, 8% South Korea and 5.8% European Union. Even more interesting are the indicators of the dynamics of the increase in the number of patent applications (2013/2012). With more than 26.4% quantitative growth in China, 8.3% in South Korea and 5.3% in the US, Europe and Japan all recorded declines of 0.4% and 4.2%, respectively. Probably no one will be surprised that Russia does not count at all in these statistics.
Maybe you need to be a visionary and a fantastic? Have a sense of mission and not be afraid of risk?
PS. Is China still a synonym of trash and imitation for you? :about)