The Business of California Is...Not Business

Whenever people bring up California's dead-last-in-the-nation reputation for having an atmosphere conducive to business, state liberals always point to Sillicon Valley, and especially Facebook as proof of their pro-business bona fides, but this only shows how truly clueless and out of it they really are:

This collective turning on of the civic light bulb comes at the same time that the primary economic delusion that has dominated progressive politics — the myth of the high-tech savior — has fallen into disrepute. Under Brown and his monumentally incompetent predecessor, Arnold Schwarzenegger, state officials maintained a belief that Silicon Valley’s money machine would be able to bail the state out of its budgetary morass. 

In this context, the underwhelming performance ofFacebook’s IPO last month takes on major political significance. Not only will there be fewer puerile billionaires to inflate the Valley real estate market and bankroll “progressive” candidates and causes, scores of hip wannabe start-ups suddenly may find themselves no longer the darlings of venture capital investors or the stock market. Like California’s budget itself, the social media boom is now looking like something of a fraud.

Jerry Brown, for one, loves to talk up California's high tech industry, as it gives him a chance to sound visionary and forward thinking, even if he couldn't tell you how social media will produce the billions in revenue that the state needs to dig itself out of its hole. But, Brown's singular focus on Facebook comes at the exclusion of even those other high tech titans who have been, and could be, even more valuable to the state, 


Take, just as an example, H-P. When CEO Meg Whitman announced H-P would be firing 10% of its workforce, I was surprised that the number amounted to about 30,000+ people. You mean H-P employs 300,000 people?! Apparently, it does. (by contrast, FB has about 3,000 employees. Whoa! is that an economic engine I hear revving?)* Granted, these are people spread around the world - often because California's regulatory environment and high cost of living make local manufacturing unprofitable - but, still ... you would think companies the size of H-P (and Intel, Apple, Oracle, etc.) could kinda, maybe be more important than FB. At the very least, you would think that truly forward-looking policy makers would want to make sure they are not actively  discouraging the true money-makers in the Valley, but that's not the sort of policy makers we've got now. 


Ultimately, none of this truly matters to Brown et al. All they cared about from the Facebook IPO were the tax bonanza they hoped to reap from an IPO "pop" that never was. They understand taxes and spending very well, but have no clue as to the economic potential in their own state. 


* Whitman has also pointed out that H-P's PC business, standing alone, would be a Fortune 50 company

How To Lose The H-P Way

When Hewlett-Packard announced that it was essentially getting out of the PC business, my reaction was WTF??? Looks like a lot of people felt the same way:

Investors abandoned Hewlett-Packard Co. after its plan to get out of the personal computer business left serious questions about the technology company's strategy.

H-P Shares plunged 20% Firday to $23.60, erasing about $12 billion in market value and leaving the stock near six-year lows.

H-P shocked investors Thursday when it said it is looking to sell or spin off its PC business, the world's largest. It also agreed to pay more than $10 billion for British soft ware maker Autonomy Corp.

H-P is one of the largest PC makers in the world, a position it earned in part through the bruising (and expensive) Compaq merger of 10 years ago. Not saying that was a genius move, but if turning your back on that was also a turning your back on one of the defining moments in the company's history. Plus, it's a multi-billion dollar business. Maybe it's not the wave of the future anymore, but it's something.

The rationalization is that this is a post-PC world of tablets and smartphones, so it's best to get out of the hardware business now before it's too late. (Here's H-P board member Marc Andresson's defense of their strategic decision making). That may be, but it's hard to imagine that PC's are simply going to disappear, any more than we are going to see the rise of the paperless office. Adding to the confusion, H-P also announced that it was confronting the brave new world of tablets by ... getting out of the tablet business.

Anyway, it's a mess. As others have noted, H-P recent losses have erased entirely the gains they had under former CEO Mark Hurd, who lost his job after tripping over the company's peculiar approach to business ethics. You can talk grandly about how special your company is, but often the "H-P Way" is little more than a way for the Illuminati to assert their will.

Whatever the merits or demerits of the Compaq merger (and eventually it became more an exercise in ego and "doing the deal" than it was a business decision), you didn't need the "H-P Way" to tell you that buying a PC maker would be expensive and messy.

You didn't need the "H-P Way" to tell you that spying on journalists and H-P board members was a bad idea and border-line criminal (although it was funny that H-P's most determined compliance hounds were its most enthusiastic spies).

And you certainly didn't need the "H-P Way" to tell you whether your CEO's clumsy sexual interest in an aging blond was a firing offence.

Also, you don't need the "H-P Way" to make a decent printer. Have I mentioned my traumatic experiences with H-P printers yet?

The "H-P Way" should be like Google's "Don't Be Evil:" a cute little mission statement that is also a good bit of self-aggrandizing PR. But, H-P actually seems to make long term strategic decisions based on it. Why not toss the I-ching while you're at it? Like GM before, H-P has a business that has (temporarily) allowed it to print money. But, also like GM, H-P is unique in its industry for its combination of size and management flailing.

Lawyers, Guns, & Money: H-P's Bribery Scandal

Gotta love the "H-P Way." The company has just disclosed that the SEC is investigating it for paying bribes in Russia and other exotic locales. But, the H-P executives carrying the suitcases full of cash no doubt filled out all of their expense reports properly!

Hewlett-Packard Co. disclosed Thursday that a probe by the U.S. Department

of Justice and the Securities and Exchange Commission of possible bribes the

company paid in Russia is now wider than previously reported.

The disclosure, in an SEC filing, pertains to a long-running German investigation of

allegations that H-P, through a German subsidiary, paid bribes in Russia to secure a

contract valued at €35 million, or about $44.5 million, with the office of the

prosecutor general of the Russian Federation.

The contract spanned 2001 to 2006 and was for the delivery and installation of an

information technology network.

U.S. authorities have joined in that probe, as The Wall Street Journal first reported

in August.

Thursday's filing says U.S. authorities recently requested information about "certain

governmental and quasi-governmental transactions in Russia and in the

Commonwealth of Independent States subregion dating back to 2000." The wording

of the filing suggests a broader probe than previously revealed.

An H-P spokeswoman said investigators were focused "primarily" on the contract

with the Russian prosecutor's office but that they have "now expanded their

investigations beyond that particular transaction."

She said H-P "has been fully cooperating with the investigating authorities."

H-P strikes me as being very similar to those politicians who proclaim they are going to "drain the swamp" and run "the most ethical administration ever" - and then preside over worse corruption than before. Their focus is always on whether the right form has been filled out, and whether this guy or that guy has been chatting up this or that blonde. They never seem to focus on whether or not bribing foreign officials is the right thing to do. I won't even mention what I think about my crappy H-P printer.

The bribery allegations date from 2001 - 2006, btw, in case any of you are out there thinking Carly Fiorina was the best possible candidate for Senate. You may also recall that it came up in one of the GOP debates that Fiorina's H-P had used a subsidiary to sell printer ink in Iran. Think we'll be hearing more about this?