Analysis: Can HP Weather The Storm And Keep Partners Happy?4:58 PM EST Thu. Oct. 04, 2012
Faced with a turnaround that may take until 2016 to complete, Hewlett-Packard is about to find out who its real friends are in the channel. Of course, this test of loyalty works both ways.
HP CEO Meg Whitman in recent weeks has been holding partner roundtable meetings, and she reiterated her commitment to the channel Wednesday in HP's annual meeting with Wall Street analysts. Yet with HP shares at their lowest levels in nine years, and misguided strategic decisions coming home to roost on HP's balance sheet, some partners are exploring contingency plans.
"While we remain steadfast in our commitment as an HP partner, we have no choice but to continue growing our partnerships with other tier-1 manufacturing partners," said one HP partner, who requested anonymity.
Whitman told analysts that HP will start to recover in 2014 and will see growth in line with gross domestic product in 2016. While the partner isn't worried about the health of his HP business, the length of the recovery window Whitman outlined is eroding his confidence in the company.
"We certainly expect to grow our HP revenue at a faster clip than HP itself will, but that isn’t good enough," said the source. "We need an HP that is a market leader, and while I do believe the ship is now headed in the correct direction, we can’t simply wait for HP to fire on all cylinders."
HP's fiscal 2013 profit forecast missed Wall Street's expectations by a country mile, and every business unit except HP Software is expected to see revenue declines. HP has nearly $30 billion in short- and long-term debt and is facing slowing demand for PCs and printers. Enterprise Services is expected to see revenue decline between 11 and 13 percent with 0 to 3 percent operating margin.
Can HP's longstanding channel friendliness withstand these enormous financial pressures? Already there are signs of HP stepping on partners' toes in its search for additional revenue.
"HP needs channel partners now more than ever. But certain business units, and individuals, want to take accounts direct to be more profitable and cut partners out," one HP partner told CRN, speaking on condition of anonymity.
NEXT: Signs Of Support In HP Channel
Channel conflict scenarios have cropped up in the past at HP, but the company's channel leadership has moved quickly to address them. Several HP partners told CRN that this track record, combined with Whitman's pledges to stay committed to partners' interests, have alleviated their concerns over HP's current struggles.
"Every great company has bumps in the road, and with the right management team, they overcome that," Sam Haffar, president and co-CEO of Computex, a Houston, Texas.-based HP partner, told CRN. "I think Meg and her management team will steward HP through these bumps."
Whitman, in recent channel roundtable meetings, has told partners HP intends to re-invest the $3.5 billion it expects to save from its corporate restructuring, including 29,000 job cuts, into R&D.
Michael Haley, president of Edge Solutions, an HP Elite partner in Alpharetta, Ga., believes HPs' R&D plans will benefit partners. "In converged infrastructure and big data, we are as bullish on HP as we have ever been," he told CRN. "We are doubling down on HP and think we will benefit from the investment."
Harry Zarek, president and CEO of Compugen, a Richmond Hill, Ontario-based HP partner, says increased R&D investment, along with more focus on partner profitability, will help HP weather the storm.
"HP's efforts and investments to become more efficient will ultimately help us, so we are supportive of the commitment," Zarek told CRN.
PUBLISHED OCT. 4, 2012