HP VAR Chernick: Ignore The PSG FUD

Rick Chernick, the CEO of Camera Corner Connecting Point, a Green Bay, Wisconsin Hewlett-Packard partner whose HP sales are up 400 percent in the last five years, had just got off the phone with one of his largest customers asking him why HP was getting out of the PC business.

Chernick, more than a little tired after fielding calls from dozens of concerned HP clients over the last 24 hours, told the customer that is not true. The customer, by the way, was poised to purchase a number of HP workstations and was now considering other options.

"Many customers are calling me saying they think HP is getting out of the PC business," said an exasperated Chernick. "That is just not the case."

Chernick Friday sent an email to 6,000 customers to set the record straight with regard to HP's disclosure that it is exploring strategic alternatives for its Personal Systems Group (PSG) business and discontinuing operations for its WebOS-based TouchPads and smartphones.

"Yesterday HP shocked the business world by announcing it was exploring 'Strategic Alternatives' for its $42 billion Personal Systems Group Division (PSG)," wrote Chernick in the email to customers. "We wanted to take this opportunity to tell our customers, stakeholders and friends what this is likely to mean for all of us. I do want to set the record straight that this business (outside of the HP TouchPad as announced) is not going away. It will remain viable. I spoke with Todd Bradley directly, the head of the PSG group at HP, who told me 'Tell them we are here to stay and will be stronger than ever!'

Chernick bleeds HP and has clearly been taken aback by the news that the $126 billion computer giant is looking at alternatives for PSG. He has many friends in PSG and does not take on any partnership unless he is willing to commit him and his company 1,000 percent to that partnership. He says he trusts the PSG leadership. It was Chernick who conducted the no holds barred question and answer session with Bradley earlier this year at HP's Americas Partner Conference.

NEXT: What Does It Mean To Camera Corner Customers?

As to what the HP announcement means to Camera Corner's customers and Camera Corner itself, Chernick could not have been more forceful in his email to customers.

"In the short term, it is business as usual," wrote Chernick. "We will continue to sell, service, and support all of HP products we have been selling for years (excluding the TouchPad). While we cannot predict the future, we do not see a scenario where this business is in danger of shutting its doors. It is too big and makes too much money for that to occur. I encourage you to ignore the fear, uncertainty and doubt (FUD) that is already being put into place by Dell, Lenovo, IBM and their VARs. "

"Have faith that as your trusted vendor and a long term HP VAR, we have your best interest at heart and that we will remain vigilant in ensuring that the products we support are the best products the market has to offer," added Chernick, who signed the email himself.

Chernick, whose father started Camera Corner Connecting Point 58 years ago, has fashioned what was once a camera store into a technology solutions powerhouse that covers every segment of the market from consumer electronics to sophisticated enterprise solutions with partners like HP, VMware, Microsoft and Shoretel. He has navigated many treacherous turns in the technology business and he is convinced that he and HP will emerge from this stronger.

Chernick is a big believer that one of the keys to maintaining stronger customer relationships is supplying the customer with a complete product set from consumer technology products that are offered at the Camera Corner Connecting Point retail store to robust enterprise information technology solutions. Chernick says having retail products that his CEO customers can buy from Connecting Point helps solidify those personal relationships. What's more, he says, one of the key differentiators for HP has been its ability to offer products from the PC to the enterprise. "That's the beauty of the HP product line," he said. "Customers like having one vendor's product line that all works together."

Chernick says he understands that HP must consider its business model going forward. "You can say you are getting out of the WebOS business," he says. "I can live with that, but you don't say you are getting out of desktops and laptops. I can't live with that."

Chernick says dealing with the fallout from the HP PSG announcement has been "tiring" to say the least. "I would like to be doing something else, like selling something," he said.

NEXT: The Full Camera Corner Connecting Point Letter To Customers

Below is the full letter Chernick sent to his customers.

Subject: Reflecting on HP's 8-18 Announcement Regarding Its Personal Systems Group

Importance: High

Yesterday HP shocked the business world by announcing it was exploring ’Strategic Alternatives’ for its $42 billion Personal Systems Group Division (PSG). We wanted to take this opportunity to tell our customers, stakeholders and friends what this is likely to mean for all of us. I do want to set the record straight that this business (outside of the HP TouchPad as announced) is not going away. It will remain viable. I spoke with Todd Bradley directly, the head of the PSG group at HP who told me ’Tell them we are here to stay and will be stronger than ever!’

Why Is HP Doing This?

At this point HP has only committed to look at possible strategic alternatives for its PSG business and that this process is likely to take 12-18 months. In its press release, it indicates that it is possible it will choose to stand pat. It still begs the question of why is HP doing this in the first place. Like all public companies, HP has a Board of Directors that has a fiduciary responsibility to maximize shareholder value. A common way of doing this is exiting out of the least profitable businesses in its portfolio. It is no secret that desktops, laptops, etc. are a lower margin business, especially relative to software and high-end computing. The HP Board feels that carving out the lowest margin business within its portfolio may be the best way to increase shareholder value. Regardless, we cannot STRESS enough that in its own right, HP PSG is a very viable, profitable, $42 billion dollar company.

NEXT: More Of Chernick's Letter To Customers What Will Happen?

It is unclear exactly what will occur over the next 18 months. Three scenarios appear most likely. First, the PSG unit will be spun off as a separate stand-alone company. Second, they are purchased. Third, after exploring strategic alternatives, HP decides to stand pat. We do know that as a separate entity, HP PSG would be ranked 59th in the Fortune 500. It would be very difficult, though not impossible, for any company to buy them simply because they are so big. We also believe that HP recognizes the power of its brand and is very unlikely to forego its brand during this transition. Anyone who purchased the company would pay a higher price to HP to maintain the brand name (GE’s name remains on many products that are no longer part of its product portfolio). What we think are the most likely scenarios are the division is spun off to shareholders or sold to an investment firm.

In either case, it is likely to be run by the current HP PSG management team. I personally know this team very well, and think very highly of their capabilities and their vision. If either scenario occurs, I think the future is very bright for HP PSG. If HP PSG is sold to another company, it would have to be to a major multi-national organization which will have considerable resources to pour into it. Finally, if HP concludes they want to keep it, they will come out of this episode more focused than ever.

What Does This Mean To Camera Corner’s Customers and To Camera Corner?

In the short term, it is business as usual. We will continue to sell, service, and support all of HP products we have been selling for years (excluding the Touchpad).

While we cannot predict the future, we do not see a scenario where this business is in danger of shutting its doors. It is too big and makes too much money for that to occur. I encourage you to ignore the fear, uncertainty and doubt that is already being put into place by Dell, Lenovo, IBM and their VARs. Have faith that as your trusted vendor and a long term HP VAR, we have your best interest at heart and that we will remain vigilant in ensuring that the products we support are the best products the market has to offer.

Please contact me or anyone one my team if you have any questions or concerns.

Sincerely,

Ric

Rick Chernick CEO Camera Corner/Connecting Point