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Are You Listening, Hewlett-Packard?

By Rich Smith – Updated Apr 6, 2017 at 6:35PM

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Netflix provides an object lesson in humility.

On Aug. 19, Hewlett-Packard (NYSE: HPQ) dropped a bombshell and blew up its stock price: Then-CEO Leo Apotheker decided it was too hard to earn a decent profit margin selling personal computers. So instead of trying, instead of leveraging his greater scale of operations to beat back Dell's (Nasdaq: DELL) challenge, and drive Apple and its iMacs into the sea, he ... gave up.

Surrendered. Abandoned the PC market, closed down the TouchPad production line, and announced a massive weekend fire sale to liquidate its stockpiles of TouchPads at prices as low as $99 apiece.

Snatching defeat from the jaws of victory from the skull of defeat
In the course of doing so -- entirely by accident and not at all to his credit -- Apotheker stumbled upon a discovery: People loved the TouchPad at the new price. By some reports, the company moved 350,000 units within just a few hours.

Which brings us to Netflix (Nasdaq: NFLX).

As you've probably heard by now, Netflix CEO Reed Hastings made an HP-sized error when he announced a split into two companies last month: a streaming business under the old moniker, and a comically -- nay, pathetically -- named DVD rental operation called Qwikster. Outcry against the move was immediate, and not at all complimentary. More importantly, though, it was noticed. This morning, Hastings transmitted a "10-4" to his customers, promising to reverse his mistake and keep the DVD business in-house. "This means no change: one website, one account, one password … in other words, no Qwikster," Hastings said.

What H-P can learn from Netflix
Having recently joined the diaspora of Netflix refugees who canceled our accounts in protest against Hastings' split-the-baby business decision, I now find myself reconsidering. Clearly, Hastings is the kind of CEO who listens to his customers. Clearly, he's not afraid to admit a mistake -- and fix it. Can HP do likewise?

Two months ago, hundreds of thousands of HP fans rushed to buy the new TouchPad at $99 a pop. One month ago, they swarmed the ramparts again, when a small cache of TouchPads was discovered at Office Depot (NYSE: ODP) -- at $150 apiece. To this day, the tablet PC remains a hot seller in the resale market on eBay (Nasdaq: EBAY), where it fetches prices of $200 and up.

Foolish takeaway
Take a page from the Netflix playbook, HP. Don't cancel the TouchPad. Build more! If you build it, we will come.

Fool contributor Rich Smith owns no shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 302 out of more than 180,000 members. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Dell, Netflix, eBay, and Apple, creating a bull call spread position in Apple, and creating a bear put spread position in Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

HP Inc. Stock Quote
HP Inc.
$24.92 (-0.48%) $0.12
Netflix, Inc. Stock Quote
Netflix, Inc.
$235.44 (-1.78%) $-4.27
Dell Technologies Inc. Stock Quote
Dell Technologies Inc.
eBay Inc. Stock Quote
eBay Inc.
$36.81 (-2.33%) $0.88
The ODP Corporation Stock Quote
The ODP Corporation
$35.15 (-1.43%) $0.51

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