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The Bloor Perspective: Leadership in the dock, HP surprises and MobilCom's tale
Robin Bloor and his team of analysts this week consider the cult of the tech CEO, HP's progress and the sobering tale of German 3G licences...

By Bloor Research

Published: Monday 09 December 2002

The IT and telecommunications sectors have had their dose of sparkling personalities with apparent strong leadership qualities over the past decade. Their ability to grow organisations with speed and control reinforces greatness until a sudden fallibility comes into prospect.

Where did the dynamics of their great leadership go wrong? According to some recent articles on the subject it comes down to two human frailties: narcissism and the control and dependency they create among others.

It's easy to see that the leader of an enterprise grows in confidence after a series of successes. They believe they have found the formula, the model, which reflects their success in carrying forward their objectives. The sense of greatness tends to be reinforced by the plethora of media, PR and professional advisers, who see the fee potential in providing financial, advisory and consultancy services for the enterprise.

More importantly, perhaps, with a few successes under their belts, leaders can substantially underestimate the scale of resources and the time necessary to accomplish their visions and objectives.

Overwhelming self-confidence brings out another disturbing trait - the growing reluctance to debate or accept contrary views leading to a 'dependency culture'. This drives away the talents of complementary but creative people, who are either ignored or driven out of the enterprise. At the same time a culture of dependency and sycophancy develops.

Second rate, less talented people surround the leader enhancing the notions greatness. Those dependent on the leader frequently make excessive commitment in their efforts to meet the objectives set by the leader. Short cuts, half-completed actions and sometimes unethical behaviour are the consequences.

This leadership model was, unfortunately, not uncommon in the chief executive of many fast growing enterprises and seemingly successful enterprises of the past decade, buoyed along by a favourable economic climate and benign financial markets. They do get their 'come-uppance' eventually but not before they have damaged the value of their enterprises, some subordinate's lives and the shareholder value. What price leadership?

*HP's very public success*

HP has been doing far better than anyone expected after its merger with Compaq. The company has not taken its eye off the ball and has proved its doubters wrong. The latest good news to come from Carly is the company's agreement for $500m of deals in the public sector.

The deals are with a range of local authorities spread through Europe and revenues will come in the next three to five years. Customers include the State Treasury of Slovakia, employment agency ANPE in France, the Belgian Federal Portal, the Swedish Government, the Ministry of the Interior in Bulgaria and the European Parliament.

The Public Sector is expected to be one of the growth areas in the future, in sharp contrast to the continued hesitancy in the commercial sector where organisations are still wary of putting pen to paper. This sense of caution is mirrored by HP. The company is predicting very conservative growth in the IT sector next year.

The company expects its loss-making enterprise and personal computer divisions - which are responsible for almost half of the company's revenue - to return to profit next year. The businesses will be reorganised in Europe but not along the same direct sales line as in the US.

Recent reports show HP leading the European server market with a 33.5 per cent share against rival IBM with just under 30 per cent. In the personal computer sector HP leads in Europe with main competitor Dell trailing considerably. On a global basis, HP has lost out compared to last year, which suggests that outside Europe there is still work to be done.

So, HP continues to make good progress. Establishing a strong foothold in the public sector signposts the way for more business of a similar nature and in other areas the company is continuing to make good, if slow, progress. With Carly now in sole charge the company should be more focused - whether or not the new HP is able to provide the serious challenge to IBM has yet to be seen.

At the moment it will be a game of catch up. Big Blue is putting serious money behind its eBusiness on Demand programme and continues to build up its services capability. That said no one can deny that HP has acquitted itself well this year and so 2003 should prove interesting.

*MobilCom writes off 3G assets*

Recently MobilCom became the first European telecommunications group to write off its total third generation mobile telephone assets.

It wrote off just under $10bn of the value of its licence. This reflected the value of its network equipment and other incomplete technology developments. It was one of a number of enterprises from which the German government raised over $50bn during its greedy auction processes of 3G licences in 2000.

It has followed in the footsteps of Spain's Telefonica, which has written down the value of its German joint venture mobile 3G licence with Finland's Sonera, to a nominal amount. This fairly demolishes any value on German 3G mobile phone licences.

MobilCom has effectively aborted its 3G mobile phone ambitions in Germany, following directional and strategy disputes with France Telecom, its former joint venture partner in 2001. France Telecom agreed to take over in excess of $7bn of debt incurred by MobilCom as a principle element in the settlement of the dispute.

Conversely, the agreement did stipulate that France Telecom would receive 90 per cent of the proceeds of any sale of the 3G assets by MobilCom. By way of understatement MobilCom stated that it was unlikely they will get the value invested returned.

Theoretically, the licences return to the German state at the end of 2003, unless it raises the ban on secondary trading of these licences. This is very unlikely in the current economic environment, as any bid value would not be far off nominal value. There are now only four mobile operators competing in the German market. It is unlikely that others are going to rush in unless they can obtain licences at rock bottom prices.

As for MobilCom, well it's back to its core service reselling business - another back to basics story.

Bloor Research is a leading independent analyst organisation in Europe. You can find out more at http://www.bloor-research.com or by emailing mail@bloor-research.com.