What should HP do ?

HP (HPQ) revealed recently that they had seriously considered spinning off their printer business, 3 times!. What a waste of time!

HP seems to have completely lost its direction, trying to do everything, from consumer electronics to utiliy computing, but not doing anything well enough.

HP, like IBM should get out of the PC business - sell it to Lenovo's competitor! While the Compaq buyout was not disastrous, it didn't really benefit HP in a big way.

Competing with IBM head-on in the IT services area will be a good start. One way to jumpstart this would be to buy an existing player like Bearing Point (BE) or Keane (KEA) or Accenture (ACN), of which Bearing Point seems to a good-sized fit. HP is definitely moving in this area, having recently bought smaller European services companies, but the pace is snail-like.

Over the last couple of years, HP started touting its Utility Computing idea, but has scaled it down substantially recently after not being able to show any worthwhile implementation/strategy, with some observers calling it futility computing. While the goal is lofty, HP has the brains and the muscle to help companies achieve something close to the real utility computing ideal. With OpenView extensions and a couple of small buyouts last year, HP made smart initial moves, but it should now take a big leap, by buying out larger companies that could help meet the utility computing dream. HP should buy one or all of these players - Veritas (VRTS), Opsware (OPSW), Altiris (ATRS). With the obvious shareholder disappointment displayed towards the Symantec/Veritas merger proposal, HP has a good chance of winning in a bidding game.

Other possible areas include another attempt to enter the application server sector, either buying out BEA (BEAS) or ATG (ARTG) and a more serious open-source initiative by outright acquisition of Red Hat (RHAT) before somebody else goes at it.

And ofcourse, HP should spin off the printer business! While at it, it should also combine it with Xerox (XRX)'s printer business.

If HP has no plans for large acquisitions, then it should atleast announce a one-time dividend payout to disburse its cash. That will keep me satisfied for a while.