Annex Bulletin 2011-15                              August 21, 2011

A partially OPEN edition

Recent...

Happy Birthday, IBM! (IBM to turn 100 on June 16; what's the secret of its success?)

Apple Falls from Tree to Cloud, Then to Earth... with a Thud (Last major holdout joins race to cloud, but falls flat on first attempt)

EDITORIAL

 

Updated 8/21/11, 12:30PM HST

Analysis of Why HP Failed - in the Context of "2012"

Service, Not Greed, Brings Lasting Fortune

HP, Wall Street, Corporate America violated natural law when it took without replenishing; Apple, IBM shining examples of the contrary

HAIKU, Maui, Aug 21, 2011 - Last week, HP got killed on Wall Street.  Its shareholders lost 28% of their market value.  And the stock had already been at a multi-year low before the latest debacle.  Why did this erstwhile highflyer fail?  That's the $200 billion-question this editorial will attempt to answer.  Make that a $13 trillion-question, as the answer is the same for Wall Street and Corporate America overall.  After all, the entire market has been slumping lately, not just HP. 

Oh, and one more thing... the same question and answer applies to our government, too.

* * *

About five years ago, HP was the best-performing stock in the Dow Jones index.  IBM was down in the dumps (see IBM vs. HP: A Tale of Two Blues, June 2006).  Now the situation is reversed.  The erstwhile Dow Jones highflyer is now worth only about a quarter of IBM, and less than 15% of Apple.  What did HP do wrong?  Or conversely, what did IBM and Apple do right?

The short answer is - HP violated the laws of nature.  You cannot take without giving back. At least not for long.  You cannot act as if you're above that law.  Businesses are successful only as long as they SERVE others.  Once they become self-serving, they fail.

Apple and IBM got that.  Year after year, Apple keeps coming up with new ideas of how to improve the quality of life for billions of people around the globe.  Its products serve humankind not Steve Jobs.  As a result, Apple's treasury is overflowing and its shareholders are over the Moon.

IBM also got that.  What Apple is doing in the consumer markets, Big Blue has been achieving in the corporate world.   Five years ago, IBM put its emphasis on quality over quantity (left chart).  Three years ago, it came up with the Smarter Planet idea.  Smarter Planet is also a service to humankind not Sam Palmisano.  As a result, IBM's treasury is overflowing and its shareholders are over the Moon.

Two different companies and drastically different cultures, same idea - SERVICE.  And the same outcome - SUCCESS.

SERVING humankind is something Wall Street and Corporate America, at large, not just HP, seem to have forgotten.  Not to mention our government.  "Of the people, by the people, for the people?"  Not anymore.  They all violated a natural law, the immutable law of the universe and not just of this planet.  It is the law that ALWAYS punishes those who take out of the communal pot more than they contribute to it.  There are no exceptions.  Students of history know that.

Forgotten Lessons from History

Once upon a time, man knew that instinctively.  He/she did not need to read an editorial to be reminded of it.  Man knew that Mother Earth, like any mother, was a loving, generous creature.  She gave man not only life, but also love and sustenance.   All she expected in return was a little respect and gratitude.  Man would give it back to her by replenishing what he/she took.  Indigenous people also nourished the Mother with their love.

In the Inca shamanic tradition, every time a shaman takes a drink or a bite of food, he/she shares a part of the nourishment with Mother Earth.  Sure, it is symbolic, but it does show love, respect and gratitude for the gifts of nature.

Every farmer knows that if he/she just takes from the land without replenishing it, the meadow will eventually turn sallow.  Here's excerpt from The American Farmer, 1855 edition:

"... I contend that Agriculture should be the first interest to be considered in legislating for the general welfare and I cannot illustrate this idea more beautifully than by again quoting from our distinguished orator of last year who said that Mr Adams, in advocating in Congress our claim to Oregon, declared it was to be found in the 28th verse of the first book of Genesis which reads:

"Be fruitful and multiply and replenish the earth and subdue (cultivate) it."

The eloquent orator in commenting upon this text showed that all nations which had preceded ours had prospered so long as they followed the injunction contained therein and were satisfied to replenish and subdue the earth.  But so soon as they turned their ploughshares into swords and commenced to subdue and destroy mankind - that from that moment they began to languish and decay.

Now I ask agriculturists to pause a and look around and see whether our has ever given much encouragement to its citizens to subdue and replenish the earth. 

It established military and naval schools where youths are taught the science of destroying mankind, but where is one for teaching them science of replenishing and subduing the earth?

Will agriculturists tolerate this any longer they assist this and that party into power to gratify the wishes of certain aspirants for office will they not rather determine to unite and themselves together and demand that the interest that feeds all clothes all and pays all shall be considered and protected in legislating the general welfare Until they unite in a determination."

The preceding was written in 1855, six years before the start of the Civil War, and 156 years before the latest HP debacle.  I would strongly urge not just Leo Apotheker and the HP Board to read the above passage, but also all CEOs of Corporate America.  It is  especially relevant to those who head up the large Wall Street firms - who designed and promoted the concept that Greed Is Good.  Ditto re. our government officials, often the revolving door of Wall Street.

Toward New Breed of Man AND New Breed of Corporation, Too

We can only violate such natural laws at a price.  When HP became the largest computer company in the world give years ago (New King of the Hill , Nov 2006), its then leader felt and acted as if he and his company were above the law.  One year ago, Mark Hurd crashed and burned (see Do As I Say Not As I Do, Aug 2010).  And now, his former company is following Hurd, hurtling down into the dumps.

The same thing happened to our big bankers' reckless lending practices in 2004-2006.  Their Greed blew up in their faces in 2007-2008.  It took a government corrupt enough to be willing to reach into the COMMUNITY pot to save these selfish INDIVIDUALS and their PRIVATE assets from a disaster they helped create. 

In the end, this bailout merely postponed the inevitable.  The mountain of public debt and a sharp decline in the value of the U.S. dollar are some of the consequences of such government imprudence.  Only corrupt leaders take more out of the community pot than they are putting in. 

Worse, by waging war all over the world at the same time, our government leaders are also "turn(ing) their ploughshares into swords and commenc(ing) to subdue and destroy mankind," as that farmers' almanac said 156 years ago.  Which means they are showing that mankind has still not learned from our past failures.  At least the so-called "elites" have not.

That must change.  And fast.  The pivotal year 2012 is now just around the corner.  The year will mark the end of a 5125 -year  human development cycle and a start of another one.   If you click on... 

...you can see what that will mean for the future of mankind.   And now you can also see what that will mean for the future of business.

If humankind is to survive and prosper, Greed must be replaced by Service to the Community.  That does not mean that profit is bad.  On the contrary, whoever provides a valuable service deserves to be rewarded for it.  But not by egregious fees that do not provide new value to the Community.  Nor by income that merely bolsters lofty egos and appetite for power over others.

Take John Paulson, for example, the famed Wall Street multibillionaire hedgefund trader. He cashed a $5 billion paycheck last year, according to the Wall Street Journal (see Guess Who's Getting Crushed By Hewlett-Packard? John Paulson).  The Journal has also just reported that Paulson had apparently lost about $500 million on HP alone even before the company's latest debacle. 

"It's hard to feel pity for a guy who cashed a $5 billion paycheck last year," the Journal noted.  Indeed.  Getting crushed by the HP crash is just one more preview of the "Greed is Not Good"-world that awaits us in 2012 and beyond.

Wall Street, Corporate America and our Government are no exception.  They had better wake up to that.  They are subject to the same natural laws of the universe as are the rest of us.  They can only ignore them at their peril. 

Or they can choose to follow the Apple and IBM examples as two shining lights giving us a glimpse into the the future.  They prosper because they work under the rainbow bridge of heavenly approval.  Just as this editorial was created under one  (see above rainbow which showed up while I was writing it).

"Be fruitful and multiply and replenish the earth and subdue (cultivate) it."

Happy bargain hunting

Bob Djurdjevic

Or just click on SEARCH and use "company or topic name" keywords.

Volume XXVI, Annex Bulletin 2011-15
August 21, 2011

Bob Djurdjevic, Editor
e-mail: annex@djurdjevic.com

(c) Copyright 2011 by Annex Research, Inc. All rights reserved.
The copyright-protected information contained in the ANNEX BULLETINS is part of the Comprehensive Market Service (CMS).  Reproduction by any means is prohibited..

Home | Headlines | Annex Bulletins | Index 1993-2011 | Special Reports | About Founder | SearchFeedbackClips | Activism | Client quotes | Speeches | Columns | Subscribe

Annex's 33rd Birthday (May 15, 2011)

 

Big Blue "Rock of Gibraltar" Stands (Analysis of IBM's first quarter business results)

 

Wall Street's New "Rock of Gibraltar" (Annual update to our 5-yr IBM forecast)

HP: Ghost of EDS Haunts HP (Analysis of HP's first quarter 2011 business results)

Case Makes a Case for Innovation (Analysis of new "Startup America" program)

HP: New Broom Sweeps Clean (Apotheker fills our first prescription in board shake-up)

IBM: Another Phoenix of the IT Industry , Analysis of IBM's 4Q10 result

One Man's Pain, Another Man's Gain? (Analysis of possible impact of Steve Jobs' health on IBM, Intel, other IT companies)

Consumer Rules (Analysis of top 15 global IT leaders' stock and business performances) 

IBM Hardware to Rise and Shine Again (Analysis of IBM STG business results and outlook)

BARRON's: IBM Shareholders Will Like New Year (Analysis of Barron's article on IBM stock)

 

HP's "Stealth CEO" Sounds Bullish in First Public Appearance (Analysis of HP's fourth quarter business results)

 

Silicon Valley Rodeo (Editorial on shenanigans and costly trivial pursuits)

 

IBM Business Up, Stock Down (Analysis of Big Blue's third quarter business results)