IBM CEO Slams HP, and That's a Really Bad Sign

It's not unusual for high tech companies to take swipes at each other. Sometimes it's like watching a session of The Dozens, in which two people insult each other's families until one runs out of comeback lines. Other times it is strained and painful. But it's exceedingly rare for a major corporate CEO to take another firm out to the corporate woodshed. Yet, that's what IBM (IBM) chief executive Sam Palmisano did to HP (HPQ). Berating his competitor on issues of strategy and governance, it brought to mind how far HP, its management, and its board have strayed and how they might have handed their competitors a big hammer to hit them with.

It's hard to overstate how out of character a dressing-down like this is from button-down IBM. Speaking at a WSJ event, he took a shot at HP's innovation:

"H-P used to be a very inventive company," Mr. Palmisano said in an interview at a Wall Street Journal event on Tuesday. IBM would never have paid what H-P did to buy data-storage provider 3PAR Inc., he said. "[H-P] had no choice," said Mr. Palmisano. "Hurd cut out all the research and development."
Well, not all the R&D, but as regular readers might remember, I've frequently written about how HP has scaled back R&D, either in absolute terms or as a percentage of revenue, quarter after quarter.

Palmisano also talked about former HP CEO Mark Hurd's severance golden parachute as bad for investors:

He said on Tuesday that Hurd's exit package -- estimated at about $34.6 million -- was a mistake, especially since Hurd very quickly joined rival Oracle Corp after departing amid a scandal related to allegations of sexual harassment."They spent a lot of money to keep him for an hour," the executive said in response to a question at the Wall Street Journal Viewpoints Executive Breakfast. "That to me was not handled in the best interests of shareholders.
Palmisano also questioned the wisdom of the acquisitions that HP has made recently, paying $2.4 billion for 3PAR (PAR) and $1.5 billion for ArcSight, saying that HP only paid that much because it had to, due to its reduced R&D over time.

Given IBM's size and success, you can't classify this as sour grapes or anything other than HP having been so hapless in strategy and operations over the last few years that it effectively openly invited the criticism. Of course, given that Big Blue's financing arm has targeted both customers of HP and Sun, now acquired by Oracle (ORCL), for new trade-in programs, it was as though HP asked for a gun and then promptly shot itself in the foot. Any time you position your competitor to verbally slap you around, you know you've been doing something stupid.

Related:

Image: Flickr user Unbridled Transportation, CC 2.0.

Featured in SciTech