HP Combines Printing And PC Groups

The new business unit, to be called the Imaging and Personal Systems Group (IPSG), will be headed by Vyomesh Joshi, a 24-year veteran of HP, who has served for three years as executive vice president of the imaging group. The move comes as some analysts have called on HP to spin off its printing business and amid speculation that the company has to counteract IBM's move to sell off its PC business to Lenovo, a conglomerate based in China.

"By putting personal systems with the most important part of the company, it says they are not looking to do what IBM just did," said Dan Renouard, an analyst at Baird. It also comes as Dell is increasing its footprint in the printer market, a business HP has dominated for decades, Renouard added.

HP's printer group is by far the most profitable part of the company. The imaging group grossed $24.2 billion in revenue, with $210 million, or less than 1 percent of revenue, in profits, while the personal systems group grossed $24.6 billion, with $3.8 billion, more than 15 percent, in profits. Renouard said HP is making a clear message that it believes Joshi and his group can help improve PC margins, or at least bring synergies to the respective product lines.

That has been a challenge in the past due to politics, turf wars and different business priorities, plus the imaging group has a legacy culture of not wanting to subsidize other divisions, added Frank Timons, also a Baird analyst.

"The divisions have not worked closely together--this has been an issue for decades," Timons said. Both Baird analysts say the move should be good for the channel because it will lead to better attach rates and other improved efficiencies.

John Thompson, vice president and general manager of HP's solution provider organization for the Americas, told VARBusiness Friday that the two groups had already worked well together and it should only benefit partners. By working together, partners should see improved profits and revenues, he said.

Partners welcomed the move saying they were hopeful it will lead to more consistency and better communication.

"You tend to get different ground rules for every group in HP you work with, so it should provide some solid unilateral direction," said Douglas Garcia, a senior partner with QuestingHound Technology Partners.

Phil Kennedy, vice president of purchasing and distribution at Connecting Point, another HP partner, said that he sees little impact since it deals with one account rep for both lines.

"There are always issues, problems and challenges but we have a great relationship," Kennedy said.

Marion Olson, the purchasing manager for TriZetto, a Newport Beach, Calif.-based health-care solution provider with $290 million in annual sales added: "Putting printing and personal systems groups together seems like a reasonable program to execute at this point at time. In many cases, that's how they're sold."

She added, "From a reseller's point of view, it truthfully doesn't affect me that much unless they change the discount rates. I already know all the information. But from HP's standpoint, having both programs under the same management will give them both equal push."

The formation of the new business unit is the largest move since late 2003, when HP reorganized its enterprise, software and services business and formed the Technology Solutions Group. Meanwhile, Zitzner's departure comes just several months after three other key executives, including Peter Blackmore and Jim Milton, were fired when HP's enterprise business tanked in the third quarter as a result of a flawed order management system.

Several analysts have downgraded HP this week, including those from Bear Stearns and Morgan Stanley. According to a Morgan Stanley report, HP faces increasing challenges in a number of areas, including a new challenge from Apple Computer, which this week released its first-ever low-end Macintosh priced at $500; less retail shelf space in 2005, thanks to Gateway and Epson, among others; continued underperformance in storage; continued supply-chain inefficiencies; and gains by its key rival, Dell, in the printer and enterprise segments.

Steven Lang contributed to this article.