Drastic HP Pivot: Axes TouchPad, Acquires $10B Autonomy Software, May Spin Off PC Business

Views : Now that some BIG decisions have been taken, Will HP be able to repeat an IBM in coming back strong; as a software company. Or?

Only a month on the market, and the device that HP said would give Android and Apple a run for their money is already finished. Rumors were confirmed today that HP will discontinue its TouchPad tablet as well its WebOS phones. Reports indicate the company plans to instead focus on software and services, while distancing itself from hardware--HP may spin off its personal-computer business and acquire enterprise software company Autonomy for $10 billion.

Also dead, the digital magazine it presciently dubbed "Pivot."

In an earnings call following the news, HP CEO Leo Apotheker attempted to explain the chaos surrounding HP's direction. "[There] is indeed a lot of news, so let me put it in perspective," he said. "Today is about transforming HP for the future."

While acknowledging the company has had to make some "tough decisions," he was clear in saying that the "tablet effect is real," meaning consumer purchasing habits are shifting away from PCs and toward the tablet market. Even still, HP's TouchPad "has not gained enough traction" and is "not meeting expectations," and will be discontinued along with other WebOS devices. The Personal Systems Group, which oversaw the TouchPad, will now be separated from HP, and possibly sold off, so HP can sharpen its focus on cloud solutions and software.

Kingfisher Airlines flies into financial turbulence

The bad news for Kingfisher continues....

Mumbai, July 19:  

Two weeks after Kingfisher Airlines' promoters pledged their entire stake to its lenders, the carrier faced fuel supply disruptions and flight delays on Monday due to unpaid fuel bills, an incident that was confirmed by the airline's spokesperson on Tuesday.

“Due to a misunderstanding with our vendors, 12 flights out of 370 daily flights were delayed. The issue has since been resolved,” the spokesperson said.

Fuel Bills

The airline has Rs 500-crore worth of unpaid aviation turbine fuel bills due to Hindustan Petroleum Corporation Ltd (HPCL). Of this, around Rs 450 crore is backed by bank guarantees. Indian Oil Corporation (IOC) too has put the airline on a cash-and-carry mode.

The company has so far not disclosed the extent of its dues to Bharat Petroleum Corporation Ltd (BPCL). “It's not just Kingfisher, other airlines too have dues which we need to recover,” said an HPCL official. For instance, national carrier Air India's dues to the public sector oil companies stand at a whopping Rs 2,400 crore.

Unpaid Airport Bills

Kingfisher's unpaid bills go beyond oil companies. The airline recently faced the prospect of being put on a cash-and-carry mode by the GMR-operated Delhi and Hyderabad airports. The airline apparently failed to make its payments in April and May and notched up dues of approximately Rs 100 crore to the two airports.

Kingfisher Airlines was able to avoid being put on cash-and-carry only after it outlined a payment structure plan to clear the dues.

Mounting Debt

The airline's total debt stood at Rs 7,651 crore last year, but it managed to bring that down to Rs 6,007 crore after a debt recast plan with its lenders. Mounting debt is an industry-wide problem. Jet Airways had a debt of Rs 13,680 crore as on March 31, 2011.

Kingfisher's promoters, however, had to pledge their entire stake to the lenders as part of its debt recast plan. Since its inception in 2005, the airline has only had one profitable quarter.

With the stock price falling sharply, the airline also runs the risk of losing its assets to the lenders.

“Their planes might need to be hypothecated to the bank if they start to default on bank payments and fail to turn around,” said a market analyst.

Since January this year, the Kingfisher Airlines stock price has fallen 71 per cent, from Rs 66.85 on January 3 to Rs 38.95 yesterday.

(This article was published in the Business Line print edition dated July 20, 2011) Source : BusinessLine. Thank You.

Taking note of Cognizant [ Some insight into what makes Cognizant click ]

Cognizant, which started life as the software arm of research firm Dun & Bradstreet, has always followed a hybrid model

For journalists of a certain vintage, this writer included, the Big Three of the IT services business in India have always been Infosys, Wipro and TCS.

Even in the 2000s, when Satyam Computer Services and HCL Technologies were on a roll, they never managed to threaten the position of the three. (To be sure, there were journalists who preferred the Big Four, with Satyam coming in fourth, and it wasn’t till the much-publicized fraud perpetrated by the company’s founder Ramalinga Raju that HCL managed to catch up with it).

There was a simple reason for this—the three (or the four) were well placed to benefit from work related to the Y2K bug (remember that?) and benefit they did, scaling up business at a rapid pace towards the end of the 1990s. The work they did gave them a head start as more companies in the US started outsourcing the development and maintenance of software applications in the early 2000s, a period when the US economy grew largely on the back of IT-led productivity gains.

Companies that came after them just couldn’t catch up – or so it seemed.

Until last week, when, for the first time, Cognizant Technology Solutions overtook Wipro in terms of quarterly revenue for the three months ended 30 June. It has been clear for at least a year or more now that this was imminent, but from a 15-year perspective, it is one of those things that could have never been predicted.
I’d like to view the development as the third of a series of changes that has reshaped the contours of the Indian IT services business. The first was Satyam’s collapse. And the second was TCS’ ascension to the role of the sector’s bellwether, a position that, until recently, had been occupied by Infosys.

A lot has been written about Cognizant’s numerical milestone (and a little on why it doesn’t really matter). This writer’s opinion is that it matters a lot for two reasons.

The first is that it proves beyond doubt that Cognizant’s hybrid model works.