Apotheker sets HP's course: Heading for the cloud

March 15, 2011: 11:36 AM ET

Hewlett Packard's CEO plans to kick the company and its flagging stock back into gear in part by selling apps and services via a new public cloud.

HP CEO Leo Apotheker

HP CEO Leo Apotheker

It's been just over eight months since Mark Hurd left HP (HPQ) beneath an avalanche of tabloid covers. In that time, HP's stock has slid just over 10%, leaving investors wondering when and how the world's largest tech company can get back on course.

Hurd's replacement, Leo Apotheker, in his first major public speech since being named to the top HP spot in September, gave his answer to a gathering of press and analysts in San Francisco Monday afternoon. During a presentation that lasted a bit over 30 minutes, Apotheker outlined three major areas of focus for HP in the coming months and years:  Cloud computing, a wide variety of Internet-connected hardware for consumers and businesses alike, and software, including pushing HP's (formerly Palm) webOS to hundreds of millions of PCs, tablets, printers and smartphones. The financial upside of this three-pronged strategy, according to HP CFO Cathie Lesjak, will be $7 per share in earnings (non-GAAP) by 2014.

The early word in the hallway filled with financial analysts was mostly good. What drew most of the attention was the public cloud Apotheker announced. With his cloud strategy Apotheker is steering the company away from direct competition at the high-end from the likes of IBM (IBM) and Oracle (ORCL), towards serving large companies and governments customers with less mission critical applications, and small and medium businesses all over the world with just about everything. "It's smart," says Cowen & Co. analyst Peter Goldmacher, "The growth at the top is finite, it's single digits, and that game is over. HP is going where the growth is."

That doesn't mean HP will have the field for itself. The HP cloud will put the world's largest PC maker in direct competition with the likes of Amazon (AMZN), Microsoft (MSFT), and Salesforce.com (CRM) that already offer compute, storage and other web-based infrastructure on which companies can run their businesses.

The cloud service Apotheker outlined will offer a one-stop-shop for software developers to test, secure, and sell all sorts of applications ranging from enterprise resource planning (ERP) to games for a tablet. It will be an online marketplace for consumers and businesses alike to do their software shopping. Develop the next Angry Birds or online calendar and HP will offer the infrastructure to sell and distribute it either to the entire world, or just within a company. HP plans on pushing its own applications, and Apotheker singled out business analytics and security as two areas on which the company will focus. On the services end, you can imagine how the $35 billion HP services business will be pushing clients hard (and just as likely being pulled) toward the HP cloud.

Apotheker promised that the HP cloud would truly be open. He offered the theoretical example of a certain German company's ERP software running on HP's cloud (considering Apotheker was formerly the CEO of that thinly-veiled German company, SAP (SAP), it might be soon much more than theoretical). "We will only vet applications for security and interoperability," Apotheker said.

The vision Apotheker has is one where HP devices interact with an HP cloud. You get things done locally if that makes the most sense for the device and the task at hand, or via some cloud-based service if that is the smarter approach. The software that ties all the devices together, and hands off between your gadgets  - tablet to PC, smartphone to printer – and between your work and home life will be webOS. HP sells two PCs and two printers every second. Starting in 2012, webOS will be shipping on all of them (in addition to smartphones and tablets).  It's clear HP is serious about pushing webOS into the market, and talks about it like it's the Windows of the future, or more accurately the Windows, iOS and Android of the future. Think of it as the connective tissue for HP's cloud.

Getting all that right is a tall order. The other biggest technology companies in world, most of them HP's current partners, stand in the way.  Still, if Wall Street was waiting to see if Apotheker had a clear-eyed vision of how HP can get its momentum back and keep it, he laid it out Monday. Now he just has to pull it off.

More from Fortune:

Join the Conversation
About This Author
Michael Copeland
Michael Copeland

Michael V. Copeland joined FORTUNE as a senior writer in September 2007. Copeland has covered everything from electric cars to e-readers. He is a creator of Tech Mate, an irreverent video series in which he debates (and skewers) digital issues of the day. Before joining FORTUNE, Copeland was a senior writer at Business 2.0. Copeland graduated from the University of Pennsylvania.

Email Michael
Current Issue
  • Give the gift of Fortune
  • Get the Fortune app
  • Subscribe
Powered by WordPress.com VIP.