HP Chief Commercial Officer: Memory Crunch Unlikely To Ease For ‘Many’ Quarters, ‘Creative’ Offsets Available

In an exclusive interview with CRN, Dave McQuarrie, chief commercial officer at HP Inc., says the goal right now is to ‘hold prices that we commit [to] for 30 days. We have been increasingly able to do that.’

While all indications point to a lengthy road ahead in the memory crunch that is impacting PC pricing and availability, HP Inc. is vigorously working with solution providers to leverage the vendor’s broader portfolio as a way to offset some of the price hikes, according to HP Chief Commercial Officer Dave McQuarrie.

In an exclusive interview with CRN on the memory crisis, McQuarrie disclosed that the company is “increasingly” able to honor price quotes for 30 days and working on a case-by-case basis to deliver on “all the contracts we can” with partners and customers.

[Related: Profitability Pressure: How Component Shortages Are Threatening Channel Margins]

HP disclosed in late February that prices for memory chips were expected to surge by approximately 100 percent, quarter over quarter, during the company’s fiscal second quarter, which ends April 30.

As the PC industry as a whole has recognized, there isn’t anything like an end in sight for the global memory crunch, which stems from the race to build new data centers to enable surging AI adoption, he said. Prices are likely to continue rising for “probably many quarters, but certainly many, many months,” McQuarrie said.

In addition to aiming to be as transparent as possible with partners, HP is pursuing some “creative” strategies to minimize the pricing pain as much as possible, according to McQuarrie.

One main example is that HP is encouraging partners to consider bundling multiple products together from across the vendor’s device portfolio, beyond just the PC, which can lead to a meaningful—though not complete—offset of the surging component prices, he said.

Notably, this type of bundling is something that HP is in a unique position to offer, given the categories the vendor covers—including Poly conferencing devices, printers, displays and services, McQuarrie said.

“That breadth of the portfolio is unmatched,” he said. “We have no [single] competitor in every one of the categories.”

Thus, given the memory cost shock is primarily impacting PCs, “we are offering partners and customers the opportunity to grow their portfolio of products with HP, and in so doing, we don’t have to pass on the full hit of the memory cost on the PC,” McQuarrie said. “We’re trying to defray or offset a significant cost increase.”

Alongside increased bundling, HP is urging partners to be as flexible as possible around device configurations, he said.

“We’re having a lot of very productive conversations with partners about changing the spec of a device,” McQuarrie said—for instance by purchasing PCs with less RAM than in the past.

It’s increasingly not just a memory pricing issue, either—meaning that other spec changes can also be valuable to consider, he noted. CPU and SSD prices are also on the rise for the same, AI-related reasons, McQuarrie said.

That means that for the many customers that are used to purchasing standard configurations with a half-terabyte or a 1-TB hard drive, that can fruitfully be reconsidered for many customers—such as those that are mainly running Microsoft 365, he said.

“Maybe you don’t need 1 TB,” McQuarrie said. “That’s just an example of changing a spec to minimize a cost, in a place that you probably won’t spot it for 99 percent of the users that you do it to.”

Partners can also benefit by placing orders sooner rather than later, as well as by being as flexible as possible around the timing for when they’ll receive devices, he said.

“The earlier we know you want something, and the more flexibility you [have], the more likely we can hold that price for long enough for you to get the product and pass it on to your customer,” McQuarrie said.

That is one factor in HP being able to maintain validity of its pricing, he noted.

As far as honoring price quotes overall, McQuarrie told CRN that “the goal that we have is to hold prices that we commit [to] for 30 days.”

Fortunately, “we have been increasingly able to do that,” he said. “We are achieving that a substantial portion of the time.”

In terms of pre-existing, longer-term contracts, each situation becomes a “very specific conversation per customer,” he said.

“Wherever we have contracts, we’re working with our customers to manage through that,” McQuarrie said. “[HP aims] to keep serving and delivering to all the contracts we can.”

As usual, in certain customer cases, such as with government agencies, supply is also being prioritized so the agencies can “get what they need [to] continue to operate all around the world,” he said.

McQuarrie also warned that partners that hope to wait out the increase are likely to be disappointed, given that prices may not begin to ease until well into 2027 or beyond.

“I would rather customers and partners feel urgent rather than think that this will pass fast,” he said. “Because while I’m sure it will pass, I’m also sure it won’t pass quickly.”

Ultimately, McQuarrie said that HP’s stated commitment to do everything it can to help partners through the crisis, however long it lasts, is more than just lip service.

“Until we’ve minimized it as much as is humanly possible, we’re going to be looking for more ways to do it,” he said.

Partners can expect “a long-term commitment that once we get through it, we come out the other side together better. So I hope that that’s the view of the broader community,” McQuarrie said. “But it’s also true that this thing has a long way in front of us. We’re [just] five months into it.”

What follows is more of CRN’s interview with McQuarrie.

What is your overall update on the memory crisis and how HP is dealing with it?

Given the choice to see the situation we’re in as a problem or an opportunity, we have decided to take it as an opportunity. It is clearly a massive impact on the industry, on customers, on the pricing [mainly for] PC devices, although it does affect others. But we feel that HP is well-positioned to serve customers and help them manage through it. We have a number of tools at our disposal. The feedback so far on those tools is positive. And while this will continue to affect us for some time, it’s happening to everybody more or less equally. And therefore, within that, how companies react becomes a differentiator. This is a global phenomenon that is going to be with us for a while. And we believe that the combination of our portfolio and the strength of our relationships with partners will carry us through—in a way that, when we come out the other side, we’ll [be able to] grow the business across a number of parts of the portfolio. It begins with your attitude to a problem. It’s clearly a huge disruption. But it’s also, we think, a significant opportunity.

Could you talk about how supply is being allocated and prioritized—especially as it pertains to partners?

The partner community knows us very well. And the one thing that I consistently am told about their relationships with us is the trust they have in us doing the right thing. Through COVID, through the tariffs and now through this, we have consistently been given feedback by partners that we are the earliest, the most transparent and the most consistent with how we are serving them and communicating to them as we learn more and figure out a way through it.

As far as allocation, the order of prioritization of the products—or of the segments of our customers and parts of our business around the world—doesn’t have a partner versus customer lens. Frankly, that’s because so much of our company’s business goes through the partner community that if we tried doing that, it’d wipe out the majority rather than anything else. So we haven’t said this partner gets more or less than another. We’ve said we are going to continue to prioritize the largest partners and customers that we have, the largest markets that we serve, the largest sets of end customers served almost always through a channel in our case. That includes our retail business, our consumer business here in the U.S. and around the world. It includes—in many cases, contractually—government customers because they have a requirement. Particularly [for] those who are in the service of parts of critical infrastructure, they continue to get prioritized. Beyond that, though, the customers and partners that are getting the most priority are the ones who are able to be earliest with what they need, be the most flexible with how we manage through the supply challenges and acknowledge that, while none of us like the price increase, that finding the least bad way through it is the way to get the supply you need for your customer or for your deal.

Gartner and IDC have shown a drop in HP’s market share for PC shipments in the latest quarter, compared to a year ago. I was wondering if that could reflect a shift in strategy to emphasize higher-end devices like AI PCs, resulting in lower volumes overall?

The growth in AI PC continues. The growth in premium products continues. We’ll talk more about that in detail when we get through our quarter end, which ends in a few weeks, and in our earnings a few weeks after that. But the outcome of that strategy and focus continues to be more and more shipments of AI PCs—not just because they’re high-end, although that is one factor. But [it’s also] because they enable the strategy of the company, which is to get a series of endpoints across a customer install base that are AI-capable, that are working together, using that AI capability to serve the customer and to integrate with one another more seamlessly. One of the biggest problems all of our customers and partners tell us they have with [workforce] technology is it doesn’t work easily together for them, and it doesn’t remove low-value work from them. An AI PC can remove a lot of low-value work. At our Imagine event a few weeks ago, we announced this notion of ‘Better Together,’ where a Poly camera on the wall and an AI PC from HP can join a meeting with one click. And we talked about our HP IQ, which is the division that runs our software for AI at the edge—allowing you to do a lot of work locally and bring down your cost of cloud AI compute. So there is a lot behind the AI PC. It continues to be a growing portion of the business that we have. But more importantly than it on its own is the role it plays in the ecosystem of the One HP portfolio—which is probably a good segue to how we’re helping customers minimize the hit of this cost shock. The example that tends to resonate with customers—and with partners who then use that same messaging—is that HP has an incredibly broad portfolio of products and services, and in only a few cases do customers or partners buy all of them to the maximum amount that they could. Often they’ll have us for PC and somebody else for print, or somebody else for the microphone they use, or the camera they look at, or the display they’re using, or the peripherals. And most of the memory cost shock is hitting PCs. So we are offering partners and customers the opportunity to grow their portfolio of products with HP, and in so doing, we don’t have to pass on the full hit of the memory cost on the PC. Because for us, we’re trying to defray or offset a significant cost increase. If we can do that by selling a customer more microphones, more docks, more displays, more printers, more cameras, more microphones and the things that we use in our day-to-day—and more services—then we’re able to bring down the amount we have to increase the PC price by. And that breadth of the portfolio is unmatched. We have competitors in every one of those categories. We have no [single] competitor in every one of the categories. And so it allows us to offer customers a solution in a way that doesn’t just solve their technical problems, but it solves their acute cost increase.

Has this led to an increase in the amount of bundling you’ve been doing in the past few months?

Yes. So our growth in services, our growth in attach—our growth in the businesses like headsets, like peripherals—is growing because it’s an effective way for a customer or a partner to absorb less of the cost in one device. If you were going to buy docks or displays or mics or cameras anyway, you needed to replace them, then you already had the budget allocated for that. The company you choose to buy it from—in this case, if you move from somebody else to HP—that allows us, through doing that bundle, to reduce the amount we have to lift the memory price. So yes, we have seen that both in our activity and it’s starting to show up [with] our partners. Partners particularly see it because a lot of partners are understandably multi-vendor. It’s obvious because their business is to serve customers what they need, no matter which product or competitor it comes from. But the opportunity right now for a partner is to say, ‘Well, I don’t buy my microphones or my headsets from you. But if I start to then I can bring down the cost of what I have to pay and the increase on my PC.’ So we’re seeing a real uptake from a number of partners who like the idea of using the power of that portfolio to minimize the cost shock of the memory and its increases.

HP had disclosed that memory prices were expected to double for its current fiscal quarter from the immediately prior quarter. What is the latest you are seeing in terms of memory pricing?

It’s significantly up. I won’t get into a precise number. But it is significantly up. And unfortunately, we expect the trend to continue. [We expect] that it will continue into next quarter, up again. [Here’s] what I am encouraging customers and partners to do and think about. [If I’m a] 5,000-person company or a 20,000-person company, I have three personas. I’m going to buy three different types of devices, and that’s it. And I’m going to boost the memory in all of them because the device will last me longer. In a time of significant availability of memory, that made some sense. We have now arrived at a point where that does not make sense very often.

And so instead, we’re having a lot of very productive conversations with partners about changing the spec of a device—extending the life with services of a device that’s already there. So we’re encouraging them not to buy another device, but to buy a service extension that allows them to [use] that asset for longer and bring down the average cost per user of getting the fleet where it needs to be. We have a piece of software called Workforce Experience Platform, or WXP. That is a digital experience platform that allows you to interrogate the telemetry off your install base and determine, for example, that you have a 32-GB system, and you need it. But I have a 32-GB system, and really, I could do with 24, based on my usage. And so the device I’m going to get is a 24-GB configuration. And in that way, even though in the past, we might have both got 32, the cost is able to come down rather than go all the way up because of a more thoughtful application based on good data. So that notion of more bespoke units to users, that is something that we’re seeing a lot of traction on from partners and customers. It resonates. So it’s that notion of continuing to be creative around [this challenge]. One way is, buy the portfolio, buy the bundle, get an advantage. Another is, be more thoughtful, more detailed, more granular about what you need. And then finally, [we have] some financing options—buy now, pay later—some creative ways of being able to have the cost of the asset spread out in a way that maybe takes some of the heat out of the short-term acquisition. So all of those are on the table. All of them are being [leveraged] by partners and customers. And we’re going to continue to do it in the spirit of getting through this over the next many quarters.

Can you provide any more sense about how much further HP expects memory prices to increase?

At some point we should see some trailing off of [prices]. It’s not going to keep doubling every quarter. That would be unlikely. The challenge is this is being called a memory crisis, and it’s more than that. The data center buildout isn’t just demanding memory—it’s demanding storage and compute CPUs. And so both storage and compute are also starting to see the same effects on either price increases and/or supply shortages. And so, the challenge to a customer is they rightly don’t care which component is going up. They just care how many dollars it’s going to drive up their price by. So unfortunately, even though memory can’t keep doubling, other components are starting to see an effect. And we are going to see those effects impact pricing for at least the next many quarters—three, four, five [quarters]. There are projections out into ’28, ’29, ’30. I think it’s probably not as far out as ’30. But of course, the behavior that will determine that is not an HP choice. The market will react to whether or not fabs can be brought on, whether or not all of the backlog ends up getting served. There are two things I would encourage customers and partners to think about because they directly address this problem. The first is, how quickly can they embrace moving AI away from the cloud? It might sound like an abstract notion for a cost problem on the device. But the reason for the cost problem on the device is the spiking demand for AI in the cloud. And therefore, as an industry, if we can start aggressively distributing AI workloads—to the edge, to the workstation, to the notebook or the PC—we are going to take heat off that data center. And we are going to allow some of that pressure that’s building to be relieved. The combination of the power of AI at the edge and the efficiency of models now—small models are becoming incredibly efficient—those two together have us working with over 100 software companies to distribute the AI workloads that they currently deploy in the cloud to the local device, or to the workstation, or both. And so if you’re a customer who’s concerned that this thing will last—and it will last some time, but you want to help reduce it—play your part. If you’re a partner, play your part. Move as much workload down. You get two benefits. One, you contribute to the ecosystem pressure release. But more importantly, you get to reduce your AI cloud spend. And $1 is $1 to any of us. And so if I’ve got to pay an extra $50 on my PC, but I can somehow reduce my cloud spend, or the growth in that by distributing AI, I would do that. So [it’s about] how do I make sure I’m at the front end of this distributed AI evolution? That’d be the first big thing that I would encourage customers to do. The second, to your point about where this is going and how long it’s going to last—the better we can plan, the better we can help our customers. An example of that is we are giving customers as much notice and committing to holding price for as long as we possibly can—in the spirit of them giving us a forecast and us being able to serve that with the supply that we have. Again, we hear from our partners—and we hope it remains true—that we are giving them as much transparency and as long a notice as they need to be able to react to this. Not all of our competitors, we understand, are doing that. But we feel, and we’re being told by partners, that we are. The more collaboratively we can work with partners to serve customers, the longer visibility we can get—and the more we can figure out how to change the config from the thing that costs a lot, or we don’t have, to the thing that costs less, or we do have—the more we’re going to be able as an ecosystem between vendors and partners to serve this. So those would be the two [key areas]. Are you playing a role in moving workloads locally? And are you actively forecasting and flexibly moving demand to where there is supply to minimize the hit? Forget the competitive dynamic right now—this is an ecosystem problem. If we can do that, and we are focused on doing that, then we’ll all get through it, and the customers will get served.

Could you speak about how long you are honoring price quotes for, and how you are handling existing contracts?

When you have contracts, it becomes a very specific conversation per customer. And so wherever we have contracts, we’re working with our customers to manage through that. We’re working back through our own internal teams to keep serving and delivering to all the contracts we can. And like I said, we have a number of customers, particularly government customers, that we are ensuring [can] get what they need, so they can continue to operate all around the world. As far as the validity of pricing, the goal that we have is to hold prices that we commit [to] for 30 days. We have been increasingly able to do that. The challenge of holding a price is not so much the cost within that short window; it’s the supply. That takes us back to—the earlier we know you want something, and the more flexibility you [have], the more likely we can hold that price for long enough for you to get the product and pass it on to your customer. We know there are different periods out there from some of our competitors. But the goal we have just described is the one that we’re focused on.

It sounds like you’re achieving that 30 days a substantial portion of the time? How are you able to do that?

We are achieving that a substantial portion of the time, yes. … The answer to your question is if something’s important enough to you, you figure it out. And what’s most important to HP through this—and we learned this through COVID—is that this too shall pass. It doesn’t feel like it in the middle of any crisis, but it will. And at the end of it, partners’ trust and customers’ trust is going to be the thing that will persist—or the lack thereof, if we don’t handle it well. And so we’ve told ourselves, based on feedback from partners and customers, this is how much time they need to plan. We are planning in that way. And [there’s a lengthy] list of things we’re doing to find ways to honor that. A very big portion of it, though, is what I said before—clarity of a forecast, flexibility to move to what we have supply of and a willingness to find a way to minimize the cost. Let’s say you’re a large customer of mine. And you come in and say, ‘I don’t like my double-digit percentage increase.’ And I say, ‘I don’t like it either. Let’s work through how we can get you to a better number. And I can [supply] other parts of your portfolio. That allows me to hold the price a little longer.’ So the list is long. Some of it I wouldn’t want to give away because I know my competitors read your publication. But the goal we have is to keep earning customers’ and partners’ trust. And we feel that’s one of the most important ways to do it.

So it sounds like simply having a willingness to address the issue is the starting point? And perhaps other OEMs do not have the same degree of willingness?

I [previously] worked at two of my biggest competitors. I love those companies. I learned at those companies. I respect them enormously. But I got my start in this industry learning from my father, who worked at HP from before I was born until I was 11 years old. So my love for our company goes back a long way. And the relationships and trust we have established in the industry go back even further. They are extremely important to us, and we’re going to do whatever we have to to keep earning them every day. So yes, there is very much a will, and so we’re working hard to find the way.

In terms of longer-term contracts, are there cases where HP is treating those as no longer valid because of the changes in component pricing?

Every contract has terms that we have to find a way to either honor or agree with customers that we can find a path forward on. As you would imagine, there isn’t a single answer to it. What is true is that we are talking to every single customer we have under contract, and every customer we don’t, about how to get through this. We know that we will get through this. And sometimes, obviously, in very heated conversations and negotiations, it can feel fraught. All of my competitors and I, we’re all going through that together with our customer base and with our partner community. And we're finding a way through it. So there isn’t a single answer. It would be inappropriate to try and make one. But we’re working through every customer, every relationship, to honor what I said—which is to find a path that minimizes the hit, acknowledges our obligations and gets them what they need.

What other advice do you have for partners?

[There’s] one piece of advice I have—and most partners already get this, but it’s worth repeating. If you accept that the cost will continue to go up for at least the next many, many months—probably many quarters, but certainly many, many months—then two things must follow. The first is that, unless you can wait a year or two or more—buying early is a good idea. If you can wait, and you think that it will come back down to a sufficient level that you can wait that long, and then it’ll be OK—I’m sure there are some people trying to do that. But in our industry, with our technology and with the advent of local AI helping defray other costs and improve the productivity of workers, who cost 100 or 1,000 times the cost of the device—that's not a big portion of the population who can just say, ‘I’ll wait this out.’ So if you can’t wait it out, then the first thing is you should get ahead of it. My first advice is, get ahead of it. I know that that’s going to drive a spike in demand that we can’t all serve. But I would rather customers and partners feel urgent rather than think that this will pass fast. Because while I’m sure it will pass, I’m also sure it won’t pass quickly. That’s the first advice I would give. If you haven’t moved to help your customers and yourself get on what you need quickly, I would do that. The second is, the winners in this, both customers and partners, are going to be the ones who demonstrate not just speed but flexibility. I can’t tell you how many times I’ve talked to customers and our own teams about the fact that, ‘I know that the order that you want me to ship you is this config—but either I don’t have it, or you don’t want to pay the price for it. So here’s an alternative, at a price you can accept or at a delivery time that you like.’ The faster you move to that—and we find a way to serve customers and partners with that product—the more partners and customers are going to win. So those would be my two—act quickly and be flexible. And I know those things sound obvious. But every company, including ours, has friction in it. Every company has people in it who think, ‘Maybe I can be the exception and I can avoid this somehow.’ I would just suggest that, right now, the early bird gets the worm.

In terms of minimizing the impact of price increases on components besides memory, such as CPUs and SSDs, what should partners be considering there?

A good example there is a lot of customers today will have a standard config with a half-terabyte or a 1-TB hard drive even though they run Microsoft 365, and the drive is doing very little in the local device. Maybe start there. Maybe you don’t need 1 TB. That's just an example of changing a spec to minimize a cost, in a place that you probably won’t spot it for 99 percent of the users that you do it to. And when there was no material cost difference between half a terabyte and 1 TB, you did it because it was easy. Now, I think a level of thoughtfulness and detail and granularity is going to help in those areas, too. CPU is the same. So we’re unfortunately beginning to see some of that. And therefore, companies and customers and partners who are able to be more flexible there are going to prevail.

Is it possible that even when the memory crunch subsides, the industry may still be facing lingering issues from the other components, i.e., those other components may extend the time frame for the crisis even further?

I wouldn’t prognosticate on it. I do know that they’re all connected to the same root cause. This is not memory’s up because of AI and SSDs are up because of something else. And so, as the root cause ameliorates, we should expect all of them to be positively affected. Whether they will do it at precisely the same time is a good question. Maybe, maybe not. That will be a contributor to our challenge as an industry over the next few quarters, for sure.

So the bottom line is, you don’t necessarily have a clear sense about when all of this does start getting better? Is it just too far off?

I have an opinion, but my opinion is no more valid than yours. Maybe I have a tiny bit more information than the average person. But no, there are so many complex moving pieces to this challenge that to speculate would be just that. The numbers are out there. The range is mid-’27 to ’30. And that’s such a wide range. I have an approach in my life that says I focus on the things that I can control. And what I can control are how well we react to it and how much we contribute to minimizing the problem. HP has, I think, because of our ‘Better Together’ story—because of our Poly peripherals, PC and print and services offering—a unique opportunity to change the way AI is done. ... We can, as we are doing every day, play an active role in distributing AI. Every device, even the ones we carry around in our hands, have incredible amounts of compute power, and work happens locally. We’re in the AI version of that. All AI work is done in the middle at the moment. And it’s not necessary, it’s not helpful, it doesn’t scale. And so to your question, when might this end? All I can control is how I react to the current state and how I try to accelerate the ending by accelerating distributed AI, and getting as much work done in the right place that takes that top off the curve [that’s] needed of the data center buildout. And if we, as an industry, and HP is all in on doing that, then maybe we accelerate by some small amount the end of this cycle.

In terms of the creative approaches you’re trying to take to navigate this crisis, do you feel like those are resonating with partners and are a differentiator for HP?

I know it’s resonating with partners because they tell me that they appreciate the approaches that we are taking. They are, appropriately, demanding more from us every day. And they should, and I want them to continue, and we aspire to continuing to improve. As to whether it’s creative enough, the goal remains to get through it and minimize the hit to partners and customers. And until we’ve minimized it as much as is humanly possible, we’re going to be looking for more ways to do it. So I think our partners should expect from us both an attitude that they can trust—which I think we’ve spent nearly nine decades reinforcing—[along with] a set of activities that will help them solve this problem and a long-term commitment that once we get through it, we come out the other side together better. So I hope that that’s the view of the broader community. It is certainly the sentiment I get when I talk to partners every week. But it’s also true that this thing has a long way in front of us. We’re [just] five months into it. And it’s going to be a lot longer than five months in front of us. So we’ve just got to keep doing the work. But yes, we are focused on continuing to be as committed and creative and as ambitious on everybody’s behalf as we can be.