Vyomesh Joshi Talks Up HP's Combination of PC Printing Groups

A week after Hewlett-Packard combined its PC and printing groups, the man tapped to head the newly formed Imaging and Personal Systems Group, Vyomesh Joshi, is traveling the world to explain the rationale behind the blockbuster decision to combine the two business units. Joshi, commonly known in the industry as VJ, most recently headed the former printing and imaging group, clearly the most profitable part of HP. Joshi is well-regarded for his management of the group, and his vision of convergence and the digital lifestyle. A 25-year veteran of HP, he joined the company in 1980 as an R&D engineer for pen plotters, graphics printers that draw images with rows of ink pens. VARBusiness caught up with VJ, executive vice president of the Imaging and Personal Systems Group, to discuss the move and his vision for the PC and imaging business moving forward and how that will impact partners.

VB: What's your perspective on the rationale for the combination of the two groups? What was the inflection point that led to the realization that this was the right thing to do and your role in advocating this?

Joshi: When Duane [Zitzner] decided to retire, we looked at these options and felt the most important thing for us is profitable growth and combining PSG [personal systems group] and IPG [imaging and printing group] will allow us to have assets that we will be able to grow, both top-line and bottom-line of the business. The way we can do that is by really providing the right kind of customer value. When we have talked to customers for the past two years, when Duane and I worked on digital photography and entertainment, customers were saying they want easy-to-set-up, easy-to-use systems. We've found that with IBM's exit, enterprise customers are telling us that HP is committed to the PC business. Customers are saying 'we've made a long-term investment in HP, and we are relying on HP to supply IT. From the customer point of view, from the partner point of view and from a profitable point-of-growth point of view, we felt that combining the two businesses was the right kind of effort with respect to the value proposition that we can have for the customer in terms of ease of setup, ease of use, and for continuity with the enterprise customers. For channel partners, there will be fewer interfaces so that it can be easy to do business with HP.

VB: How do you plan to take advantage of IBM's decision to sell its PC business to Lenovo?

Joshi: It is very clear that this particular combination makes a big statement that HP, unlike IBM, is absolutely committed to the PC business. We phenomenally believe that we want to provide IT to enterprise customers in a consistent and long-term way. We have worked with our channel partners and customers, and this is an opportunity for us to really help our customers to have HP as a real alternative in terms of providing PC and printing technologies and other IT technologies in a very consistent way. So we are going to take advantage and work with our channel partners going after IBM customers, and telling the story in a very aggressive fashion.

VB: How and when will the new group manifest itself to partners from the standpoint of combined marketing and distribution?

Joshi: One of the key things all of the channel partners are telling us is make sure we are consistent, and in terms of continuity, you provide the relationship. I have no interest or reason to change that. We will have stability, while at the same time leverage our synergies to help customers in terms of providing that value proposition.

VB: Couldn't a potentially weak PC business moving forward bring down an otherwise strong and profitable printing business?

Joshi: As you know, the printing business has been consistently delivering 7 [percent] to 9 percent revenue growth and 13 [percent] to 15 percent operating profit. We have the strategies, we have a firm understanding of all our customer needs so we will continue to do that. Duane has done a great job at making the PC business profitable. He made $210 million of operating profit in 2004--what I want to do is build on the success that Duane had and continue to improve the top line and bottom line of the PC business. I believe this combination really allows me to take the PC business to the next level of revenue and profitability.

VB: What's your philosophy on how that can go to the next level?

Joshi: The first thing is the customer value proposition. I absolutely believe that ease of setup and ease of use is a tremendous value proposition that we can throw that out to the customer. Doing that is harder than people think. Innovation has become an important factor in achieving that vision in both consumer and small and medium business. When IBM exited the business, it was a golden opportunity to go after their customers to really say HP is going to provide you with PCs and solutions for your business. Because we've combined the two businesses, we have the interfaces that we can simplify. With the same consistent relationship we have, we can take it to the next level of simplification. I do believe we have a lot of opportunity on the supply-chain side. We will be able to clearly simplify and take more cost out and improve our performance in terms of working with our channel partners to have the right kind of approach from the supply chain. So we both can take cost out and improve our profitability. And the last part, we will be able to utilize the assets we have from imaging and printing to the systems group to grow out new categories.

VB: Dell has just regained market-share leadership in the PC business. Is there going to be less focus by HP on grabbing the top spot moving forward and more focus on profitability and PC attach rates?

Joshi: I think it's important for us, and Duane has been very clear, that in the PC business, we have the right balance in profitability and revenue growth, and we will continue doing that. I do believe improving profitability is a higher priority. That's what I am going to focus on, not market share.

VB: For VARs and partners, selling PCs are a low-margin sale. What do you see doing, if anything, to encourage partners to sell your PCs?

Joshi: We have to create the right kind of basket. It's about PCs, extended warranties, and that's the approach we will take. We will be able to improve the top and bottom lines.

VB: You're running a promotion out of your direct PC sales business offering substantial discounts and rebates. Will those same promotions be available to partners? Will they be on an equal playing field?

Joshi: We have been very channel-centric. We believe our partners allow us the broad reach that we absolutely need. So what we are going to do is to have a very channel-friendly approach. In the imaging and printing business, our channel has been the key way we go to market. Having combined these two business will allow us to really work with channel partners in a very positive and a clearly channel-centric approach.

VB: That said, what efforts are being made to ensure your direct efforts don't undercut your channels?

Joshi: Direct efforts are mainly based on the choices that customers are making. Customers are basically saying they want to shop everywhere, but they need to have stability so they can buy direct or buy it from our partners. The approach we have taken has been both from the customer point of view and partner point of view. We will continue doing that. It's in our interest that we grow with the channel.

VB: What's your view of thin clients [and PC blades]?

Joshi: I think thin clients are a very important part. That really allows customers to have a choice in terms of what they want to run on the desktop, and what they want to run in terms of the server-based architecture. Financial institutions that are in certain vertical markets where we have really achieved phenomenal success, I really want to build on it so they have the flexibility on what they have on their desktop and how they want to implement. They want security and manageability. I think you can achieve that in a flexible way.

VB: The implication is that a combined business unit might suggest less focus than separate units. How are you going to make it clear to the market that that focus won't be lost?

Joshi: From a financial transparency point of view, you're going to continue to have IPG and PSG financials with transparency. I think that drives the focus. I have a very senior, very experienced team, in IPG and PSG. What I'm going to do is ask them to step up to continue to drive and focus and at the same time grow the profitable growth.

VB: How do you see the PC business changing over the next year or two?

Joshi: I think the PC business will change. There's a tremendous opportunity in the emerging markets. PC penetration is very low and I think it's a great growth opportunity. Second, as convergence happens in the consumer electronics market [that will let customers enjoy] content and also have PC functionality. Also with the work we are doing to get blade architecture with PCs will be a huge growth opportunity. And the last part, I believe you will see a services business model, with which we will be able to both grow top line and bottom line. I think this category will become an absolutely very important part for profitable growth.

VB: Do you see a non-Windows desktop, perhaps based on Linux, or licensing the Macintosh operating system as having any future?

Joshi: Windows is the operating system for PCs. And I believe we not only need to continue to work with Microsoft but bring new functionality that customers will appreciate. In some cases, Linux will be important, but I do believe a majority of the business will be Windows-based.