HP To Double Direct Efforts

While that pales in comparison to archrival Dell, which counts almost all of its sales coming directly from customers, it's a significant increase from the current 12 percent today. "Our intent is to double the amount of direct we are doing by 2006," said Duane Zitzner, executive vice president for HP's Personal Systems Group.

Much of that increase could come from upselling efforts, which will be a key focus moving forward. HP has already been pushing efforts to upsell products, such as monitors, printers and other peripherals, and will only increase its marketing resources toward that end, Zitzner said, noting that's where key margin opportunities lie.

While promising to continue to leverage its direct channels, Zitzner maintained that partners will see continued revenue growth as well. That will include providing opportunities for channel partners through its direct engine where appropriate. Toward that end, HP will continue to provide new tools in the coming year that give partners better visibility of inventory in its supply chain, developing new partner relationship management systems and aligning its PartnerOne program with customer feedback.

Meanwhile, in a major shift, HP chairman and CEO Carly Fiorina said the company will begin reporting revenue from its HP Services Group and Enterprise Systems Group under one umbrella organization, which will be called the Technology Solutions Group.

Fiorina refused to address a report in Wall Street Journal that said that the move is part of a plan to merge its services and enterprise business units. Under that scenario, the report stated that HP Services executive vice president Ann Livermore would head the newly formed group. "You will be getting more detail," Fiorina said. An HP spokesman wouldn't confirm or deny the report.

HP may have raised more questions than answers, according to one analyst attending the event. "They were being very careful not to say much," the analyst said. "There's more to this than meets the eye."

But the move is intended to provide more information, not less, HP officials said. As part of the formation of TSG, for the first time HP will start breaking out its enterprise-software revenues, Fiorina said. Despite having a software business that pales that of IBM, Fiorina pointed to the fact that the company has invested $100 million in acquisitions of software-management companies, looking to grow its offerings under the OpenView umbrella. And the HP plans to invest another $100 million in the 2004 fiscal year, she said.

Overall, the mood of the HP executive team was upbeat. For the 2004 fiscal year, which began last month, HP is forecasting greater than 20 percent earnings-per-share growth, Fiorina said. Revenues are projected to increase 6 percent, from $73.1 billion in 2003 to $77.3 billion in 2004. The dominant growth will come from the SMB and consumer segments.

On the enterprise side, Fiorina said the company is expecting growth in the low single digits. "CEOs, CIOs and CXOs have learned permanent caution. They have also learned they have excess capacity," she said. That is her primary case for pushing forth HP's Adaptive Enterprise, which relies on integration to better tie IT to the needs of a business.