Search
Homepage Rankings and Research Companies Channelcast Marketing Matters CRNtv Events WOTC Avaya Newsroom Experiences That Matter Cisco Partner Summit Digital 2020 Cyber Resilience Zone HPE Zone The Business Continuity Center Enterprise Tech Provider Masergy Zenith Partner Program Newsroom HP Reinvent Digital Newsroom Hitachi Vantara Digital Newsroom IBM Newsroom Juniper Newsroom Intel Partner Connect 2021 NetApp Digital Newsroom The IoT Integrator Intel Tech Provider Zone NetApp Data Fabric WatchGuard Digital Newsroom

HP Doing ‘Anything We Can’ To Fulfill ‘Huge’ PC Demand: CEO Enrique Lores

But as component shortages and supply chain issues remain severe, partners should expect only a ‘gradual improvement over the next quarters,’ Lores tells CRN.

HP Inc. is working aggressively to meet the surging demand for PCs as offices re-open, but partners should expect a similar level of constraints on PC supplies to continue in the coming quarters, HP CEO Enrique Lores told CRN.

“We are doing anything we can to get as many components, and to increase our capacity, as much as possible. Because we understand that customers are not happy with [partners] not being able to supply [PCs],” Lores said in an interview Friday at the company’s headquarters in Palo Alto, Calif.

[Related: Windows 11: Partners See Complications In Rollout Amid PC Shortages]

With demand remaining massive for PCs and key components in short supply, HP has a backlog of orders equal to an entire quarter’s worth of PC sales, Lores said—or a roughly $10 billion backlog.

That was approximately the size of the company’s PC backlog at the end of its fiscal third quarter, ended July 31. And Lores said that the backlog size will likely be unchanged as of the close of HP’s current quarter in late October—even with the new measures the company is taking to address the issue.

“I think we are going to see a gradual impact of the actions we are taking. We don’t think this is going to flip and immediately we will be able to address the huge demand that we see,” Lores said. “But you will see a gradual improvement over the next quarters.”

About 60 percent of the backlog is for commercial PCs, he said.

At one solution provider that works with HP as its primary PC vendor, there is typically now a wait of three to six months for PC orders, said the CEO of the solution provider, who asked to not be identified. That’s in contrast to the typical one-week wait for PCs prior to the pandemic, the CEO said.

“It’s just crazy,” the solution provider CEO said. “There is pent-up demand from customers because things are now starting to get more back to normal. They’re wanting to spend some money [on PCs]. And we can’t take it from them.”

Since many customers don’t want to wait months to get their new PCs, the solution provider is frequently “in a scramble to find whatever we can,” the CEO said. In some cases, that has meant buying Lenovo or Dell PCs that were available.

Lower-priced PCs are especially hard to come by, the solution provider CEO said.

Among solution providers, “all of the community is pretty frustrated with the supply chain issues,” the CEO said.

The industry-wide constraints are due both to shortages on components such as semiconductors along with severe disruption in the supply chain, including massive congestion in ports such as Los Angeles.

During HP’s fiscal Q3, revenue in its personal systems business was flat year-over-year despite the soaring demand for PCs. Laptops have seen the highest demand.

“It’s important that our partners know that we are doing anything we can to improve availability and to get as many components as we need,” Lores said. “We are working with suppliers to get long-term agreements, we are improving our processes, we’re simplifying our portfolio. And all these things will have an impact in us being able to provide more products to our customers.”

HP previously used an outsource model where ODMs (original device manufacturers) had been managing relationships with components suppliers in addition to managing production. But now, HP has begun signing agreements with components suppliers to manage access to components directly, Lores disclosed during the company’s quarterly call with analysts in August.

HP has also begun to design its products so that more devices use the same components—optimizing the efficiency of components usage—rather than having so many devices that use unique components, Lores said in August.

Additionally, HP has deployed a new ERP system to optimize its ordering for components, which should also help improve components access, he said.

HP has also been making other extra efforts to help partners hit deadlines on priority needs for PCs, said Harry Zarek, president and CEO of Richmond Hill, Ontario-based Compugen, No. 53 on CRN’s Solution Provider 500 for 2021. Zarek said he would give HP a “pretty high score” on how the company has handled the supply constraints.

In providing education customers with HP devices for the return to remote classes in late August, for instance, “we couldn’t get all of the products we wanted—but we got way more than we had initially anticipated,” Zarek said.

HP has shown an ability to prioritize effectively in order to fulfill the most “critical” customer needs, he said.

“They’re pulling out all kinds of stops. Generally they would tell us that they would put the product on ships—but now they’re not. They’re air freighting [products] for critical delivery dates,” Zarek said. “Those are the kinds of things that I would say really distinguish them. I give them kudos.”

In an interview with CRN on Friday, HP Chief Commercial Officer Christoph Schell said the company is “learning every day how to operate better in a supply-constrained environment.”

“That doesn’t mean that the supply constraint will go away. We’re just getting better at managing it,” Schell said. “When we give you an outlook on, ‘we think this particular product will ship in X days’—we’re getting more accurate there.”

When it comes to the component shortages, the largest issue right now is around integrated circuits (ICs), which are “a bit like oxygen” in the tech and automotive worlds, he said.

ICs are used in “the mobile phone industry, the IT industry across pretty much all the categories there, the server business and storage business,” Schell said. “Automotive is a huge, huge customer for ICs—in particular as they are migrating from combustion engines to electric vehicles. An electric vehicle uses a lot more ICs.”

As a result, “demand is up across all of these categories. And so there’s a capacity challenge,” he said. “And at the same time, while everybody’s trying to bring capacity up, you have certain countries being impacted again, on and off, by COVID. And so it is a very volatile situation.”

At Norman, Okla.-based HP partner BNB Technology, Mitzi Hernandez, director of purchasing and sales, said some customers have “gotten a little irritated” with the far longer waits for PCs than they were accustomed to. She’s also having to spend a lot more time looking for available supply of PCs.

“But I know it’s not HP’s fault,” Hernandez said. “Most of the clients understand that too — that it’s out of our hands.”

‘Very Strong Demand’

On the demand side of the equation, Lores said that the reopening of offices has led to increased PC orders from businesses. Many companies have decided they want to “offer a better experience” to employees who are returning to work, he said.

“In many cases, companies didn’t invest in these categories” during the pandemic, Lores said. “So now, they realize they need to renew the equipment for their employees.”

Additionally, many businesses are also now seeking to equip employees with two devices—one for the home and one for the office, Lores said.

Meanwhile, as the overall size of the PC market has expanded, “there is more replenishment as well,” he said. “So there are many factors that continue to contribute to the very strong demand.”

The supply constraints also loom large as Microsoft and PC makers prepare to launch the Windows 11 operating system on Oct. 5.

The supply issues could impact the Windows 11 rollout, Lores acknowledged.

“It’s going to put a limit on how many PCs will be available,” he said. “But there will be enough [PCs] for it to be a successful launch.”

Looking ahead, Lores said that while a number of factors are difficult to forecast around, “No. 1 is demand.”

“If demand continues to be that strong, then the delta between demand and supply will continue,” Lores said—noting that demand for components is coming from phones, cars and healthcare in addition to PCs.

“There is so much demand for [key components]. And that I think is going to continue and stay with us for some time,” he said.

‘A Channel Company’

HP is the largest PC vendor in the U.S. by market share, having captured 28.4 percent of the market during the second quarter of the year, according to research firm Gartner. CRN reported this week that the No. 2 vendor in the market, Dell, has launched a sales charge aimed at taking more Dell PC sales direct in North America.

The channel conflict created by this action is driving some Dell partners to push business to HP and Lenovo, sources said.

“HP has been and will continue to be a channel company,” Lores told CRN. “We do the highest percentage of our business with partners. This is our core strategy. And when we think about new offerings, new products, new services—we always think about them in terms of what is the business model for HP, and what is the business model for the channel—so we can grow together. I think this is a unique differentiator for us versus any other company, and I think it’s something that partners should expect will continue in the future.”

Jennifer Zarate contributed to this article.

Back to Top

Video

     

    trending stories

    sponsored resources