"The decision to accept the position was an easy one," said Apotheker Friday. "No other company can match what HP does in the marketplace."
"HP should be more valuable than the sum of its parts," said Apotheker, the only person offered the job. "Software (which accounts for just 3% of the company's annual revenue of about $118 billion) is sort of the glue to make that happen."
"I believe HP is an undervalued company," he said. Given the company's diversified products and services, he said, it is uniquely positioned to thrive over the next few years.
Though HP is the world's No. 1 PC maker and one of its most venerable names, Apotheker will be its fourth CEO in the past decade, if you include Lesjak. Before Hurd, Carly Fiorina, was pushed out after clashing with the HP board. HP is a printer manufacturer that has struggled to dominate in desktops, smartphones and software, despite an aggressive acquisition approach dwarfed only by Oracle and IBM.
As expected, there are a lot of politics within HP. However, Apothecker has the experience to deal with them successfully. HP now has a growing emphasis around services, following its acquisition of EDS last year. SAP is not a major services company, but Apotheker’s long stint as head of SAP’s customer operations unit will serve him well there.
A partner of HP said that the company is at the center of transformation and that if it fails in moving its full weight in the line of software in about 3-5 years, they might find themselves at the heart of commoditized printer and PC business showing high volume but profit margins utterly low.
In a conference call that served as his formal introduction to Wall Street, Leo Apotheker called software the "glue" that will hold together the different parts of the company. "Software is how we can make sure that the various parts of our technology actually fit well together," he said.
Even before his comments, it was telling enough that HP didn't choose the head of its PC or printer businesses — the company's traditional strengths — and instead tapped an executive who has spent more than two decades in the business software industry and far from Silicon Valley.
"HP is in the midst of a transformation," says R. "Ray" Wang, a partner at Altimeter Group LLC. "If they don't make the move into software in the next three to five years, they're going to find themselves in a really commoditized PC business with high volume and low profit margins."
With its own software business still small, HP will have to resort to acquisitions if it wants to build serious scale, the same way it bought Electronic Data Systems in 2008 to double its services business. Speculation is mounting that it might attempt to buy SAP. HP will face stiff competition from other tech heavyweights looking to position themselves as the leading one-stop shop for information technology.
The real question is how will this new focus on software impact the printer and cartridge business that has been the cash cow for HP? It remains to be seen.