4 ms·

I think the objection stated in the artical is to buybacks and downsizing at the same time, which the author claims was done by HP, for example. I don't know wh

by elipsey 11y ago

I think the objection stated in the artical is to buybacks and downsizing at the same time, which the author claims was done by HP, for example. I don't know whether to credit this, but naively, it makes sense that this practice might contract output by cutting costs and transfering the savings to shareholders instead of reinvesting in more promising endeavours. It does seem like HP sort of makes less stuff every year. Didn't they go from making mainframes to desktops, to rebranding desktops manufactured elsewhere, and then finally to giving up tablets and dumping WebOS 18 months after they bought it?

Lazare 11y ago
HP is a company in decline, yes. But: 1) The money doesn't just go away. It ends up being spent or invested somewhere else. HP's loss is someone else's gain. 2) What's the alternative? HP is struggling to adapt to a changing world. They didn't stop making mainframes because they got bored with it. The options aren't "successful HP vs failed HP", it's more like "HP definitely wasting the money vs HP giving it back so investors can find someone who might not waste the money". Consider Microsoft: They made (are still making!) an enormous amount of cash from their "legacy" desktop OS and apps business. And they have burned (and are still burning) an enormous amount of cash utterly failing to succeed at search, gaming hardware, mobile devices, cloud computing, and probably ten other industries I can't recall. At one point I believe MS was losing $2B/year just on Bing, and what do they have to show for it? Even if they eventually "win" one of these gambles and end up dominating the market for tablets (or whatever), will they come out ahead on balance?
- elipsey 11y ago
  So buybacks plus downsizing is a good way for a company with huge cash reserves and no viable business strategy to just give the money to shareholders, and then take their ball and go home... Another kind of "Creative Destruction" perhaps?

by elipsey 11y ago

Lazare 11y ago

HP is a company in decline, yes. But: 1) The money doesn't just go away. It ends up being spent or invested somewhere else. HP's loss is someone else's gain. 2) What's the alternative? HP is struggling to adapt to a changing world. They didn't stop making mainframes because they got bored with it. The options aren't "successful HP vs failed HP", it's more like "HP definitely wasting the money vs HP giving it back so investors can find someone who might not waste the money". Consider Microsoft: They made (are still making!) an enormous amount of cash from their "legacy" desktop OS and apps business. And they have burned (and are still burning) an enormous amount of cash utterly failing to succeed at search, gaming hardware, mobile devices, cloud computing, and probably ten other industries I can't recall. At one point I believe MS was losing $2B/year just on Bing, and what do they have to show for it? Even if they eventually "win" one of these gambles and end up dominating the market for tablets (or whatever), will they come out ahead on balance?

elipsey 11y ago
So buybacks plus downsizing is a good way for a company with huge cash reserves and no viable business strategy to just give the money to shareholders, and then take their ball and go home... Another kind of "Creative Destruction" perhaps?