HP Execs Query Partners Using Gray Market Parts

The Palo Alto, Calif.-based IT giant will discourage such behavior by offering greater incentives to partners that take full-fledged HP products to market, said HP CEO Mark Hurd last week.

Hurd said HP does not look favorably on partners that are taking parts out of HP systems and replacing them with gray market parts and then using the HP parts for spares. The parts replacement could expose customers to less-reliable HP products, Hurd said. “That is not helpful,” he said, adding that HP is responsible for the quality of HP-branded products.

Todd Bradley, executive vice president of HP&'s Personal Systems Group, said HP has been talking to some partners about the gray market issue. In fact, he said, HP has “retooled” several partner agreements and worked with “a lot of those people on how we recover some of the money that potentially we are due or both of us are due.”

Bradley would not disclose which partners have crossed the gray market line. However, he noted that it&'s not clear if it is confined to one class of partner.

“Desperate people do what they need to, I guess,” said Joe Balsarotti, president of Software To Go, a Clayton, Mo.-based solution provider. “I&'ve never seen it in any machines that people come in with. But if they have some way of tracking that, it doesn&'t sound like a bad thing. If the customer buys an HP system, they should be getting HP.”

Balsarotti believes HP&'s gray market troubles are not that significant and would like to see HP focus on other channel issues, such as more clearly differentiating between HP consumer and business systems. “People in small businesses especially will go to a [retailer] and buy the consumer unit and it doesn&'t last because it&'s not meant to be on 40 hours a week. It leaves a bad taste in the mouth about HP.”

That said, Balsarotti applauded the progress Hurd has made. “All I know is HP&'s stock is going up, while Dell&'s is going down,” he said. “I am all for that.”