Ring in the New: Facebook Grows While HP Contemplates Huge Cuts




We already know that Facebook and its 2,000 or so employees are about to hit the big time. If you haven’t heard you must live under the same rock as SpongeBob’s buddy, Patrick, does.

So rather than belabor an already over-reported “story” let’s do a quick comparison that today’s Facebook IPO brings to the forefront. Let’s just say this is a day when we may see the real changing of the guard in the world of ‘tech’.

I put tech in quotes because while many will claim Facebook is a tech company I will say that that idea is just plain wrong. Facebook is a media / publishing company that USES technology. It is a marketing vehicle. It is not going out and reselling technology solutions to people, it is going out and selling marketing solutions to people. As a result, Facebook is looking at a $100 billion valuation and many newly minted millionaires today.

Now let the Valley’s pendulum swing in the complete opposite direction and the news is not nearly as happy. Hewlett-Packard (HP), once a powerhouse in the tech world is reporting the complete antithesis of the Facebook situation. Bloomberg reports

Hewlett-Packard Co. (HPQ) is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.

The number to be cut includes 10,000 to 15,000 from Hewlett-Packard’s enterprise services group, which sells a range of information-technology services and has been beset by declining profitability, said these people, who asked not to be identified because the plans aren’t final and may change.

Even if these plans do change, just the fact that HP is considering this kind of action is scary.

Today marks the day that the tide has truly turned. Innovation is occurring in the soft services of the tech world. True tech companies are being pushed aside and are falling quickly into the “means to an end” category vs. being the end itself. A few quick points when looking at HP v Facebook.

  • Facebook stands to double the market cap of HP in just 8 years
  • Facebook has somewhere north of 2000 employees while HP has around 325,000
  • Facebook revenue last year was over $3 billion while HP’s net PROFIT was almost $10 billion
  • HP started in a garage (an iconic Valley image) while Facebook started in Cambridge, MA in the new symbol of the start-up, a dorm room (Google did it as well just on another coast)
  • Facebook is making news on the way up while HP makes it on the way down

This kind of side by side comparison can come off as a bit confusing. HP has 3 times the profit that Facebook has in total revenue. HP employs about 150 times the number of people Facebook does. HP is over seventy years old and has deep roots while Facebook is a newcomer.

So why the upswing for Facebook and the bleak outlook for HP? It’s the realization that the past means nothing. Why do you think mutual funds advertise their great results then put the asterisk on it which reads that past results are not an indicator of future performance”?

The future is not in hardware. That’s not new but today it becomes REALLY obvious. The future is in selling and marketing. Consumers may one day simply have dumb boxes that let them access everything in the cloud. If a large portion of your revenues is dependent on hardware sales and innovation you are likely to be a dinosaur much sooner than later. Hardware will be needed but it might become so commoditized that brands might not even matter anymore. HP, Dell, Acer etc will not matter in the least. They barely do today.

So what’s the point? The point is that today likely marks the key day when the tide truly turned toward the Internet age. We have the evidence in Facebook’s success and HP’s distress.

If you or your company have not fully embraced the Internet era let today be your final wake-up call. There will not be any tears shed for the loss of once powerful companies. Companies like HP could suffer the same fate as the horse and buggy if they are not moving where the world moves.

To heck with HP! Are you moving? If not, why not?