CyberTech Rambler

August 19, 2011

Selling crown jewels is really dangerous business

Filed under: Uncategorized — ctrambler @ 7:19 am

Companies do sometime make bad decisions. One of the worse bad decision it might bet the company on something that did not pay off. It is part of the risk companies take.

However, when it involves selling off part of the business that you are famous and in the lead for because it is dull and to pursue more sexy business that the company is not in the lead, that will not be sound decision. One knows one is doing it if there is a lot of opposition or surprise when one announces the decision. I call this selling off the crown jewels.

So far, of the  three examples I heard of in the tech industry, two failed, and one is not doing as well as it would.

The first example is Marconi. It decided to sell its defense and wireless equipment business to concentrate on the telecommunication business. That was made at the height of dot-com boom and almost tanked the company when it burst.

Today we have the second example in HP. When one thinks of HP, one thinks of its test equipment business mainly, followed by electronic parts business. Computers? Not in a million years. When Fiorina tried to sell off the crown jewel to concentrate on computers. That shocked a lot of people. It met opposition from at least one descendent of the company’s founder. Unfortunately for HP, it happened. Today, we heard that it is throwing away the computer business to concentrate on the IT business. That’s a sad situation for a company that sold its crown jewel. Probably the only lucky thing is the spin out company that got HP’s crown jewels, Agilent Technology, is still a leader in the field.

The example that is not doing that well is Motorola. It’s well known for its semiconductor business. Telecommunication equipment? We know it exists but a world leader? No. After the spin off the business to Freescale Semiconductor to concentrate on telecommunication, Motorola’s finances were up and down. Unlike Marconi or HP, at least it has its high moment when Motorola Razr was the rage and the spinning off of its crown jewels looks like it might be paying off. Today, like the other two, it is a shadow of itself, having split itself yet again and sold the mobile business to Google recently.

The new, diminished HP and Motorola now wants to emulate IBM by concentrating on business computing solution. That field of business computing, i.e., the place I lump consultancy, software writing and large scale computing equipment purchase together, seems to be a favourite dumping ground for companies past its former glory. Incidentally, in case you are asking, IBM did not sell off its crown jewels, it simply lose it to competition.

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