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Thursday, March 22, 2012

HP confirms PCs, printing will merge

SAN JOSE, Calif. – Hewlett-Packard Co. on Wednesday confirmed plans for a corporate overhaul that will combine two of its biggest divisions, printing and PCs, in an effort by new CEO Meg Whitman to turn the troubled tech giant around.

Under the reorganization, which represents some of the biggest changes at HP in years, Whitman also is consolidating global sales, marketing and communications functions that had been spread across different business units.

“The result will be a faster, more streamlined, performance-driven HP,” Whitman said in a statement Wednesday morning.

The announcement does not mention any cutbacks or layoffs, although industry experts have said that some cuts are likely as Whitman follows through on a promise to streamline HP’s far-flung tech businesses and trim operating costs.

HP’s announcement did confirm a significant shake-up in the executive ranks: The combined printing and PC unit will be led by longtime PC chief Todd Bradley, 53, who is widely credited with helping make HP the world’s No. 1 seller of PCs in recent years.

Veteran printing head Vyomesh “VJ” Joshi, 57, will leave the company.

In addition, HP said its global accounts organization, responsible for selling commercial tech products to big customers around the world, would be added to the responsibilities of David Donatelli, an executive vice president who already oversees the HP division responsible for producing commercial data center hardware, such as servers, storage and networking gear.

The company said Jan Zadak, an executive vice president who had overseen global sales, will move into a new role that will be announced later.

HP also said it will consolidate marketing functions from different business units under Marty Homlish, the company’s chief marketing officer. Similarly, chief communications officer Henry Gomez will now oversee public relations staffers across the company.

The biggest changes, however, involve printing and PCs, which have been the powerhouse businesses at HP in past years, but which are no longer the biggest growth engines.

Printing and PCs provided a combined $15 billion in revenue for HP last quarter, or about half the company’s total sales. But both divisions have reported slowing sales in recent years, as printing habits have changed and consumers have turned to smartphones and tablets as alternatives to PCs.

HP has considered a number of broad changes for its PC and printing groups in recent years, including former CEO Leo Apotheker’s controversial proposal last summer to get out of the PC business entirely. That plan was part of a broader strategic effort to emphasize more profitable businesses, including commercial software and cloud computing.

Whitman vetoed the idea of a PC spinoff soon after she replaced Apotheker last fall, after concluding it didn’t make financial sense. But she has said HP will continue to expand its software and commercial tech businesses.

Reaction on Wall Street to the new plan was mixed.

ISI Group analyst Brian Marshall called the plan “a positive move aimed at value creation.” In an interview, he said combining the two groups should allow HP to cut some redundant costs and increase its buying power for components and other supplies.

Needham analyst Richard Kugele, however, said in an email that he views the restructuring “as a worrying sign” that the printing division may have deeper problems than HP has previously acknowledged. “We believe Bradley can fix the operation, but it would likely take a considerable amount of time.”

Some analysts said the new corporate structure in particular shows the declining prominence of printing at HP. Printing was once the company’s biggest business, providing a third of HP’s annual revenue and more than half its operating profit during the middle years of last decade. But printing’s contribution has gotten smaller as HP has expanded in data center hardware, software and tech services.

While sales of PCs and printers are not drying up overnight, analysts say both businesses are threatened by new technology trends. Many consumers and workers are turning to smartphones and tablets instead of PCs, and they are increasingly using those devices to store and display documents and photos, instead of printing them out.

HP hopes that merging the two divisions will help save money by consolidating sales and other functions. A source familiar with HP’s plans, who spoke on condition of anonymity, said the company also hopes to design and market its printers and PCs more effectively together.

The effect of any cutbacks could not be determined Wednesday. HP has nearly 350,000 employees but it does not provide a breakdown by division. The printing business is headquartered near San Diego, while the PC unit has been based in Silicon Valley.