This is a devastating expose on the dysfunctional upper echelon at HP:

“The company is coming apart at the seams,” said one person familiar with H.P.’s operations. “Because they may or may not be selling the PC business, the enterprise side is completely frozen. The business customers who buy tens of thousands of these machines along with support contracts are shutting them out. Dell and Lenovo are all over these accounts. They’re having a field day. H.P. is self-destructing.” A full-page ad in major newspapers trying to reassure PC customers did little to assuage doubts.

I feel sad and pissed off at the same time… HP is a company that literally defined Silicon Valley at one point but has become in more recent years the laughingstock as the company that went out of it’s way to snatch defeat from the jaws of victory.

When Apotheker was hired there was a lively Enterprise Irregulars thread on the news and several people expressed dismay that HP had just hired a CEO who understood only $4b of HP’s $126b in annual revenue, and that observation has never been more poignant than it is today.

In the wake of the last week’s public airing of Apotheker’s fate, he is done at HP and I feel bad for him personally because after this it is hard to imagine any scenario where his professional reputation recovers. While he should have known this was not a good fit for him the fact is that HP’s Board of Directors was tasked with finding the right person for the job, not the person who would say yes.

HP’s Board also should be overhauled, and by overhaul I mean completely replaced. Shareholders have suffered tremendously on their watch and the history of Board dysfunction going back to Fiorina needs to be addressed. Exhibit A for the case that they are unwilling to acknowledge their failings is the news that they are considering Meg Whitman as interim CEO.

UPDATE: Kara Swisher is reporting that Whitman will in fact get the CEO role at HP, as early as today. HP has gone from a CEO with experience in 3% of their business to a CEO with experience in 0.00%. Brilliant.

Like Tom, I am also a big fan of the team at Lunarr and over the last year and a half have become good friends with Hideshi Hamaguchi, who is one of the most interesting and generous of heart people you will have the good fortune of meeting.

I’m a big fan of the team behind Lunarr, a startup based in Portland, OR, and led by two of Japan’s top entrepreneurs: Toru Takasuka and Hideshi Hamaguchi. I was sad to hear that Lunarr is shutting down its service by May 10.

[From Lunarr Is Going Dark . . .]

When Hideshi told me they were shutting Lunarr down I was saddened but not surprised. Their tale is emblematic of the challenges that startups have getting a consumer/SMB products launched and to critical mass when the demands for features and integration to third party services exceed the ability of startup resources to deliver them, and it is also worth remembering that software development is still a time and resource intensive process even with the range of tools that are available.

The cost of acquiring customers is not insignificant either, especially when the macro environment favors the stability of large brands leading to a big getting bigger dynamic. The demand for features coupled with an increasingly fickle consumer market means that getting it right from the start is more critical than ever and even when you do generate some buzz and interest, converting tryers into users remains a significant challenge.

With an ability to self fund the operation of this company well into the future, it is apparent that Toru and Hideshi looked at Lunarr’s prospects objectively, not as founders but as investors, and could not see a disruptive event propelling forward. I admire this discipline because it’s rare in Silicon Valley where we demonstrate an institutional bias that favors hope over experience.

While I am saddened by the demise of Lunarr, I take with me great satisfaction in the knowledge that my relationship with Toru and Hideshi transcends any single company.

Great idea, I still think they should have named it “RuhRoh”.

To do this, he has enlisted the help of a Mountain View startup called BooRah, which is launching a new “reputation management” service for restaurant owners. The 2-year-old company, which started as a restaurant search site, is expanding to create summaries of everything that’s being written about a particular dining establishment. It uses technology developed in-house to analyze the sentiments in online reviews and then generate scores, rankings and summaries.

[From New site gives restaurateurs data on reviews]

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At this point I doubt there is any new information available that would dissuade people from the notion that Vista was one very screwed up launch, so I guess Microsoft’s PR strategy momentarily shifted to stating the obvious.

The answers we got during this mid-June background conversation were brutally honest: Our source, a high-ranking Windows product manager, conceded that Microsoft botched the Vista launch. He added that the company’s biggest concern wasn’t the OS but rather the eroded faith in Microsoft’s flagship product among users of all types and experience levels.

[From Exclusive Interview: Microsoft Admits What Went Wrong with Vista, and How They Fixed It]

I don’t think Vista is that bad or fatally flawed, in fact once it’s working people seem to be okay with it. But that’s the problem, you should get more for your money than simply not being annoyed anymore… but the real problem is probably that Vista is the desktop equivalent of fighting the last war. The referenced “eroded faith in Microsoft” cuts to the very core of what Microsoft has to maintain at all costs, trust.

Apple successfully shifted the debate to “the OS is a commodity, it’s everything on top of the OS that matters” and Microsoft has never been prone to shipping useful or even tolerable applications with their OS releases. They prefer to preserve that option for upselling you a separate package later. The notion of utility has shifted from being able to faithfully support other people’s apps to value that I get out of the box and on this latter point Microsoft is far far behind Apple.

Worse for Microsoft is that their distribution strategy weakens their customer advocacy position by allowing PC manufacturers to crapify the desktop of your new machine, further adding to bloat and annoyance.

The folks in Redmond will get this sorted out and in the end it could be the catalyst that leads to major strategy shifts for the desktop business unit. As has been noted many times throughout the history of this company, they are always at their best when they have something to target.

Ironically, while Microsoft diligently works to sort itself out it may be that Apple is just passing the apex of it’s meteoric rise of recent years. MobileMe has been an acknowledged black eye, the iPhone 3G has been plagued by issues related to battery life and network performance, and there have been quality issues (MagSafe and iPod Nanos catching fire). Apple’s shine isn’t quite as glossy and this has people asking “what’s next?”.

Over the years I have been thoroughly unimpressed with Yellowpages.com for local search, yet in a display of cognitive dissonance I keep using them when I need to find a local business. Almost every time I give up and Google, which itself is okay but not great for local search. The yellowpages.com categories are confusing, their notion of local doesn’t map to mine (they returned South El Monte for something… that’s LA), the reviews are practically non-existent, and the interface is confusing.

So yesterday I need to find an appliance parts store and after yet another frustrating experience with yellowpages.com, I ended up googling and by chance found local search engine YellowBot.com. What a pleasant surprise.

The interface is smart, using tags and skipping categorization altogether while instead relying on good search. I searched on a couple of different business types and in each case the list of returned items was pretty damn good. The review data is spotty but that’s not surprising, it looks early stage, but in some categories it’s not bad. I have two standard searches that I use to test local search, “pizza” and “car wash” and in each case I was impressed with the results.

I haven’t tried the mobile version yet but suspect it will be similarly useful.

Lot’s of commentary today about VMware missing their number and CEO Greene out of the top job. For the record, when I was at SAP Ventures we looked at this deal but passed because of the husband/wife team (generally a big red flag for venture deals). It worked out for Diane and Mendel, and it would be stating the obvious to say that I regretted we passed on that deal but not just for the financial implications, Diane is the kind of entrepreneur you want to deal with, sincere and genuine but also really really smart.

Having said that, I think comments like this are misplaced and reactive:

Er, VMware may have tweaked its revenue forecast for 2008 to be “modestly below” previous guidance of 50 per cent growth. Few executives of multi-billion dollar companies usually get fired for 49 per cent growth, especially with an imploding worldwide economy in the background.

[From EMC CEO's ego has cost investors billions | The Register]

VMW has been at the center of a lot of confusion about their revenue forecasts and actual performance. Following the catastrophic Jan 28th conference call with analysts there was a lively discussion on the Enterprise Irregulars message board about their call and the details. In Q4’07 the company put up $412m against a $417m forecast… which being off $5m doesn’t seem disastrous but the fact that they came up $5m short while sitting on $550m in deferred revenues made no sense.

On that Jan 28th call they forecast that revenue would grow from $1.3b to $1.9b in 2008, 50% growth which again does not look bad. What that meant is that the company would need to add about $650m in 2008 revenue to meet their growth target of 50%, but when you consider that $550m in deferred revenue on the books it means they were really treading water for 2008. Basically they weren’t growing 50% at all but rather just covering their bases… and this from a company that had reliably put up 80% revenue growth.

At the time there was a line of thought that the company was resetting Wall St. expectations but today we can comfortably suggest that the company has some serious competitive and market challenges facing them. Blame Wall St. for being overly reactive but what investors were challenging is that apparent deceleration in VMW’s business and no substantive answers for what was going on.

Dayak is one of the most interesting companies I saw at the Launch Silicon Valley event yesterday. What I liked about it is that they don’t seek to disintermediate the recruiting market, they attempt to optimize the existing marketplace dynamics by enhancing the opportunity to recruiters (the intermediaries) to make more money through the ability to cast a wider net for new job listings.

Secondly, professional recruiters tend to focus only on management and high annual salary technical positions, which is not surprising considering that recruiter compensation is a function of flat fee and a variable fee tied to the salary of the position they are placing. Dayak is expanding into lower salary blue and white collar positions and having success at both posting job reqs and getting recruiters to actually submit resumes.

Neat company, something that I never would have thought would have interested me but after listening to the pitch I was sold.

Posting jobs is absolutely free and employers pick their own fee for a successful hire. Employers create a detailed job profile that gives recruiters the information they need to quickly identify the right candidate for the position. Once posted, employer jobs are only visible to a network of professional recruiters (not job seekers).

[From Dayak - The Recruiting Marketplace]

Kedrosky is right, this is by far the most humorous take on Icahn’s proposed slate of directors:

Sake Oil – aka Mark Cuban: a An entrepreneur with a history of creating companies that he then sells for far more than they are worth to sucker corporations. Cuban sold broadcast.com to Yahoo for $5.7bn at the height of the dotcom bubble – useful experience for selling Yahoo to Microsoft.

Although while this is clever, they did miss tying it to another movie with their Independence Day reference in the final paragraph, something about hacking into the mother ship with a trojan horse, planting a virus, then escaping just before it explodes.

Dennis nicely captured the 3 people that I’ve read on the HP/EDS deal: Tom Foremski, Larry Dignan, and Vinnie Mirchandani:

My take is skewed by experiences I’ve seen in Europe where EDS has been removed or had its contractual relationships significantly cut back as projects have either failed, been ‘botched’ or it’s been forced to bid under onerous conditions. While everyone points to flat growth, contract cutbacks and changes in the infrastructure world, the long term problems in some of these massive contracts have made EDS a relatively target.

[From HP to take out EDS: does it make sense? | Irregular Enterprise | ZDNet.com]

This deal actually makes a lot of sense because EDS has been under a lot of pressure to improve performance while at the same time being constrained by their existing business, the industry, and culture. Acquisitions have the potential to disrupt all three factors.

Secondly, for HP this is a good move because of EDS’ outsourcing business providing a growth opportunity not just for services but also hardware, HP’s core business. These businesses require extreme scale in order for the economics to work and as a consequence the server hardware market is contracting and expanding at the same time. With companies increasingly moving to hosted data centers and on-demand applications, not to mention hosted cloud initiatives, there are fewer but bigger hardware purchasers.

Lastly, HP definitely needs to get in the game with a cloud initiative and while EDS doesn’t explicitly have that asset today it is not a stretch to give them the benefit of the doubt for their ability to get in this game given the right prioritization.

I had a meeting at Yahoo on Friday afternoon. It was like the other 1,835 meetings I’ve had there over the years, it also won’t produce anything meaningful.

What struck me about the meeting was how little energy there is on that campus, it’s a dreadful place to be, even if just briefly. The other folks in the meeting just went through the motions. I saw the look in their eyes and knew what it meant, that “even though this may be a good idea, it ain’t gonna happen for reasons we have no control over.” In retrospect, I wish they just came out and said that from the get-go, we could have saved everyone’s time.

One guy replayed the talking points of the day, that the last couple of months have really brought the people together yada yada yada. I was almost waiting for him to refer to a “the experience of being in a forge” or some other metaphor meant to convey a toughening in the face of challenging times. I just kept thinking that as a Yahoo shareholder I wish they got off their asses 2 years ago and figured out how to work together better.

I actually sat there kind of speechless as I repressed every fiber of my being to not say something when he went on to suggest that the executives and Board were doing a great job at building more value through their negotiating tactics… I should have said something, it would have cut the meeting short.

The advice was given to me that we should develop on some of the Yahoo technologies to build goodwill because “that gets people here interested”. That’s all well and good but I’m not inclined to invest my scarce development resources on a development exercise who’s sole purpose is to prove I’m serious. The days when I’ll trek down to Yahoo HQ and prostrate myself on the steps and wait with breathless anticipation for a hand to reach down to annoint me the chosen one are over… even Google doesn’t make me do that.

Lot’s of bus dev people like to suggest that you should develop with their technologies to get things going and it’s always bullshit. It’s an excuse they use to mask their ineffectiveness at the hands of a silo’ed and bureaucratic organization. Yahoo is about as silo’ed as they come.

Yahoo! Open Strategy was referenced a couple of times, or rather “YOS” in Yahoo geek speak. It’s pretty evident to me that this initiative is going to have Yahoo out in the weeds for the next 3-6 months, providing yet another reason for me to not invest more time trying to do something with them. Basically the company has pinned their entire future on something that is yet another technology exercise and a promise to rewrite Yahoo, none of which will solve the basic targeting and measurement problem that Yahoo has been struggling with for years. I thought Panama was going to fix that… but now it looks evident that Yahoo will give up on that and outsource search advertising to Google… awesome Jerry.

Yahoo says it wants developers to build to their platform, my experience suggests that their desires simply are not matched with incentives and initiative that is required of them to do it. Given the way these businesses inside Yahoo are run, I’d be surprised if they can get all of Yahoo on the same playbook in 6 months.

There’s still a chance that the Microsoft acquisition could get done, the investors (me included) are ready to feed Yang and Filo to the wolves and the fact that the stock dropped to a level that is still well above the price when the deal was first announced, well that suggest the Street is hedging on the possibility that this could still happen. I think Ballmer is done, that he sees the dysfunction that is this company and realizes he was about to bite off more than he could chew.