HP Combines PC, Printer Groups - InformationWeek

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3/20/2012
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HP Combines PC, Printer Groups

Hewlett Packard merges two humbled business units for greater operational efficiency. It may now be harder for investors to assess the health and margins of each operation.

Having last year considered and then abandoned the idea of selling of its PC division, Hewlett Packard came up with alternative plan: On Wednesday it confirmed that it will merge its PC-making Personal Systems Group (PSG) with its Imaging and Printing Group (IPG).

In so doing, HP aims to spend less on operational costs and to reinvigorate two divisions that have lost their past luster.

HP confirmed that the combined printing and PC unit will be led by longtime PC chief Bradley, who is given credit for making HP the world's No. 1 seller of PCs in recent years. Veteran printing head Vyomesh Joshi, 57, will leave the company.

HP also said its global accounts organization, responsible for selling commercial tech products to big customers around the world, would be headed by David Donatelli, an executive vice president. Donatelli runs the HP division responsible for producing data center hardware, such as servers, storage, and networking gear. Jan Zadak, an executive vice president who had overseen global sales, will move into a new role that will be announced later, the company said.

During its Q1 2012 conference call for investors last month, CEO Meg Whitman conceded that times have been tough for HP and hinted that a reorganization was coming. Noting that HP's businesses operated in separate silos, she said there is "much more that we can do to streamline operations."

[ Read HP Will Keep PC Division. ]

HP's PSG saw its revenue decline 15% year-over-year during Q1, which Whitman attributed a hard drive shortage in Asia and ongoing difficulties in China.

Revenue for the company's IPG during the same period decreased 7% year-over-year. There's less need to print when a tablet computer screen can stand in for a piece of paper.

And that's to say nothing of the turmoil that accompanied Leo Apotheker's reign as CEO--November 2010 to September 2011--during which the company's stock price declined some 40% and its foray into the tablet market failed dismally.

Whitman said HP's management was exploring ways to build on IPG's leadership within the limitations of the current market.

"All of you know IPG has been the lifeblood of our company for a long time with great margins and very resilient revenues," she said last month. "And IPG is still a great HP business, the undisputed leader in the printing and imaging industry and well positioned to capture the shift from analog to digital. But we also have to recognize that the business is being pressured on multiple fronts, and revenues from our adjacent businesses, like commercial digital prints, are doing quite well, but not developing fast enough to replace the revenues we've been losing."

Joining the two business units may have some downsides for investors. It will be harder to assess the health and margins of each operation going forward. Also, the combination of consumer and enterprise product lines under one roof might not be a good fit.

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