HP's Bradley Urges Board To Act Quickly In PC Spin-Off11:00 AM EST Thu. Sep. 08, 2011
Todd Bradley, the hard-charging executive vice president of Hewlett Packard's Personal Systems Group (PSG), is encouraging HP's board of directors to move quickly to spin out the company's $40 billion PC unit into a "standalone, publicly held" business that will remain what he called the largest and most profitable PC company in the world.
Bradley, who took the helm of the PC business six years ago and put in place a strategy that moved HP from No. 2 in the PC market to No. 1, is going on the offensive to drive what he is calling "speed and clarity" around a publicly-held HP PC business spin-off.
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To that end, Bradley said in an exclusive, wide-ranging 45-minute interview with CRN that he is determined to move as "fast as we can" to get the spin-off completed to eliminate the clouds of "uncertainty" that are hanging over both PSG and HP.
Bradley's message to the board: "Go! Go! Go! We have got to make an announcement. We have got to get this done. We have got to settle the uncertainty in the marketplace broadly for HP. Not just for PSG. The uncertainty is causing ripples across our business. And we have worked too hard to build what we have to open doors for other people to come in."
That is just what is happening in the sales trenches, partners say, with competitors like Dell swooping in to try to sway partners and customers that are re-evaluating purchases that were in the sales pipeline before HP's board of directors announced on Aug. 18 that HP was evaluating strategic alternatives for PSG including the "separation of the PC business into a separate company through a spin-off or other transaction."
HP has said that it expects the "process" around a PSG separation could take as long as 12 months to 18 months. Bradley, for his part, said he is pushing to get the spin-off done "as fast as we can." And, he added, "no matter what the timing is our support for growing our business is unscathed, is unflappable."
Bradley acknowledged that he can not provide an iron-clad guarantee that PSG will be spun out as a publicly held stand-alone business, but he left little doubt that he is fighting within HP for just that outcome, and made it clear that he wants to run the spin-off.
NEXT: Bradley Turns His Focus To The Future Of The PC Business
"I think that board is very well aware of the success that we have had and frankly I think very confident of the success we will have," Bradley said. "A lot of this [talk] is about what has happened in the past. What I am focused on is what is going to happen in the future."
Bradley said the HP PSG spin-off is a far cry from IBM's sale of its PC business in 2005. "IBM had to sell a money-losing business," he said. "What we are creating is more shareholder value. Our ability to hopefully spin off PSG as again the largest most profitable PC company in the world that supports the largest channel in the world is an opportunity to continue to grow -- not an opportunity to retrench."
Bradley said he and his team are going on the offensive into the sales trenches to make sure that customers understand the power of a stand-alone, publicly-held PSG spin-off. "In our minds the best defense is a great offense using the old football analogy," he said.
That offense includes a television advertising blitz aimed at showcasing PSG's product innovation, along with print campaigns aimed at highlighting HP's channel partnership legacy and the financial strength of a stand-alone PSG business. HP is also working on new incentives for partners including $3,000 in free PSG technology for those partners that close $500,000 in the third fiscal quarter and who sell the same or more in the fourth quarter.
"What is going to happen soon as we complete this process is the largest PC company that is a division of the largest IT company will be a stand-alone, publicly held largest PC company in the world, over $40 billion in revenue, over $2 billion in operating profit, operations in over 170 countries," said Bradley discussing the future of the PC business. "The same people that built that huge division are going to now build an even bigger and better PC company standing on its own."
That is a message that Bradley is pushing hard to partners, particularly with a full court offensive being mounted by Dell to recruit HP partners. As for that Dell campaign, Bradley said: "I think history speaks for itself related to many of our competitors. So what has changed in the last three weeks? Our commitment to the channel hasn't changed. Our commitment to our partners hasn't changed. Our commitment to growth hasn't changed. Our supply chain hasn't changed."
Bradley said HP's sales reps and partners are battling Dell in the sales trenches. His message to his team: "If you are talking to a customer, that means Dell can't be talking to them."
NEXT: Bradley Pledges Strong HP PC Spin-Off Partner Commitment
Bradley also pledged the same strong channel commitment that has characterized HP's PSG business under his leadership will be part and parcel of a stand-alone unit.
"All of our partners should know from the past to never underestimate our willingness and ability to go to the market and win with them," he said. "Don't believe everything you are told by our competitors. We have a long history of winning together and I think we have a great future to do that together coming up. Again the team that got all these partners to where they are is the team that is going to take them to the next step in hopefully a spun-out company."
Bradley's comments come in the midst of a whistle stop tour across the country with partners and customers to address their questions related to the PSG spin-off.
Bradley this week was in Redmond, Wash., meeting with one of HP's top enterprise partners, Denali Advanced Integration, touring the company's facilities where over 25,000 HP PCs were shipped last year. What's more, he is planning on meeting more top partners over the next several weeks, as are other HP's top PSG executives including PSG Senior Vice President and General Manager Stephen DiFranco.
Majdi "Mike" Daher, the co-founder and CEO of Denali Advanced Integration, whose PSG sales are up 90 percent in the last 12 months, said he is heartened by Bradley's commitment to spinning off the PSG business as a stand-alone public company rather than selling the unit to another vendor.
"The best possible scenario for the channel is for PSG to be a stand-alone organization with Todd in charge instead of being a part of a larger organization," said Daher. "If a spin-off occurs, we can continue to go about our business as we have done in the past. But if PSG is acquired by another organization, that will create significant complications. That opens the door for PSG to be part of a company that is not channel- or partner-centric. That would be a fundamental change for partners."
HP partners have said customers would be more likely to continue to buy products from a publicly-held PSG spin-off led by Bradley than from a new company that has absorbed PSG. They said they see Bradley and DiFranco as fiery channel advocates determined to drive continued business and consumer device innovation backed up by best-in-class partner programs.
NEXT: Partners Say Customers Will Welcome A Bradley-Led HP PC Spin-Off
"If it is a spin-off with the current team led by Todd Bradley, our customers will continue to be loyal to HP," said Rick Chernick, the CEO of Camera Corner Connecting Point, one of HP's top SMB partners based in Green Bay, Wisc. "This is not about Rick Chernick and his company. It is not about HP -- it's about what the customer thinks. You have got to take care of the customer. Customers can live with PSG as a publicly-held spin-off. No problem. What they can't live with is more confusion, uncertainty and changes that a sale of the PC business would entail. Customers like the HP product quality, innovation, programs and resellers relationships. That would change with the sale of PSG to another company."
Mont Phelps, CEO of Waltham, Mass.-based NWN, one of HP's fastest growing partners, praised Bradley and DiFranco for getting into the sales trenches to help partners win deals. "It is really important that they get out into accounts and go face to face with the customer," said Phelps. "DiFranco just did that for us on a big deal. It totally diffused the issue of a PC spin-off. The important thing is we need to have conversations about the merits of the technology and the solution for customers."
Bradley said that sharp focus on customers remains unwavering even in the midst of the process to spin out the PC business. "We are more focused on gaining customer insight than we have ever been," he said. "Putting more resources in place to understand it. Not just from a channel perspective, but also from a consumer perspective because we are at the beginning of the impact of the consumerization of IT on the enterprise, on any of our partner's customers. I think we are once again leading the industry in a thought process that says 'How are we going to lead the industry through this next transition?'"
Bradley also opened the door to the possibility that a PSG spin-off could be freer to deal with other vendors as it charts the course for the next generation of client devices. When asked whether a PSG spin-off will establish other relationships with third party companies, Bradley echoed comments made by HP Chairman Ray Lane: "The reason to do this is to enable PSG to respond more quickly to the markets that it competes in."
Denali's Daher, for his part, sees a PSG spin-off as more in the mold of an Apple driving a new era of client devices. "PSG as a stand-alone plays to the strength of what PSG is all about," he said. "PSG's history speaks for itself. They have the largest and most intricate network of channel partners across 170 countries. They are going to build on what is successful and got them where they are today. Six years ago, HP was No. 2 in the PC market. Today they are No. 1. They are going to build on that and make sure they take their partners with them."