Blue Chip Tech Companies Struggle To Adapt To The Modern Landscape

• The Hewlett-Packard Company HPQ spin-off that takes place next week is the next step in the company’s turnaround plan.
• Hewlett-Packard joins several other tech blue chips that are fighting to compete in the modern landscape.
• FBR & Co believes that 2016 will be a critical year for these companies to demonstrate their adaptability.

Starting next week, Hewlett-Packard will split into Hewlett Packard Enterprise and HP Inc. In a new report, FBR & Co analyst Daniel Ives discusses the future for Hewlett-Packard and several other large tech stalwarts.

IT Spending

According to Ives, IT spending has become very focused on particular areas of innovation in recent years. In fact, he goes so far as to call the trend in IT spending “bipolar.”

Big data analytics, cloud computing and cybersecurity have generated incredible 30-40 percent annual spending growth in recent years. On the other hand, traditional hardware, services and datacenter implementations have been struggling to simply tread water.

Related Link: EMC + Dell = Biggest Tech Merger Of All Time

Pivotal Year

Ives believes that it’s time for many of the larger tech names to show that they can adapt or they will run the risk of being left in the past. “We view 2016 as a pivotal year for some of the once-dominating tech stalwarts to prove that a turnaround could be in the cards despite Everest-like growth challenges,” he explained. These tech giants must demonstrate to shareholders and the rest of the world that they have viable plans to compete in the $100 billion-plus next-generation datacenter market.

Game Plans

Ives outlines the primary strategy that each of these big tech companies is betting on:

• Hewlett-Packard: executing the spin-off and cutting costs
• EMC Corporation EMC: integrating with Dell, the largest merger in tech history
• Oracle Corporation ORCL: capturing share in the cloud market with 12c
• International Business Machines Corp. IBM: targeting new strategic initiatives in could and analytics
• Cisco Systems, Inc. CSCO: transforming into a next-generation networking and security competitor

Although all of these companies face a hard road ahead, Ives points out that transitions in the tech world can be successful and that rival Microsoft Corporation MSFT has so far executed its cloud transition masterfully.

Disclosure: the author holds no position in the stocks mentioned.