In the last print and digital issue of CDN we ran a black and white illustration of Hewlett-Packard Co. (NYSE: HPQ) CEO Meg Whitman asking “Can Meg pen a new headline?” The concept for the cover was wondering if, with all the less than stellar news HP produced last year, this fresh voice from eBay can change things.
Well, her second major move (not spinning-off or selling PSG was the first) was a welcome one for channel executives here in Canada. The merger of the imaging and printing group (IPG) with the personal systems group (PSG) will remove a lot of red tape for distributors and channel partners alike. More importantly for HP, it easily creates a profitable division instead of a having one profitable division and another one that was so-so.
Just looking at the numbers, this move makes a lot of sense. PSG is a juggernaut pulling in close to $9 billion in revenue just last quarter. IPG brings in more than $6 billion and the two make up half of HP’s total revenue.
The printer business has been a lucrative one for HP historically. The company has always held down the top spot in printing. But the operating margin for HP’s printer division last quarter was 12.2 per cent, down from 17 per cent a year earlier. Still very decent margins. Both the PC and printer divisions reported declining sales last quarter. This was one reason for turning some deals direct, such as the Royal Bank of Canada contract last year.
The fall guy for this move is Vyomesh “VJ” Joshi, the longtime head of HP’s printer business. He’s the odd man out despite 32 stellar years of service with results most executives can only dream of. Someone always gets whacked when a company does this type of internal consolidation.
The question remains what will occur at HP Canada. Will Peter Galanis, the current HP Canada president, be forced to do the same unification in Canada? From the two channel executives I spoke to it seems clear the same will happen here.
Leyland Brown, the head of PSG in Canada, reports to Todd Bradley with a dotted line into Galinas. Does this mean Lloyd Bryant, the head of IPG in Canada, will be the odd man out? I hope not! Bryant would be a huge loss to HP Canada.
We’re all left to speculate because HP Canada executives refuse to let its channel partners and customers know what is going on.
HP Canada’s media representative told me the subsidiary would not be taking interview requests. Not a wise move, if you ask me. You should always be ahead of stories like this one; not behind them.
Combining the two divisions will make for a larger, more profitable group. HP can even save in places where there is overlap. Large, global companies do this all the time.
I don’t think Canadian channel players will have a huge problem with this move, but they have to know what the Canadian operations plan of action is. Keeping them in the dark will only lead to speculation and I’m sure the fine folks at Lenovo Canada, Dell Canada, and Acer Canada will be calling on these solution providers setting themselves up an excellent alternative to HP.
This move also flies in the face of the recent decision from HP Canada to reposition people inside its Solution Provider Organizations that effectively removed the Channel Chief role at the subsidiary. In late December of 2011, HP Canada spread out the channel chief role. Instead of one channel chief for HP Canada, that responsibility will now reside within each of HP Canada’s main business units, such as the personal systems group (PSG), imaging and printing group (IPG) and enterprise servers, storage and networking group (ESSN). What happens to this strategy if both groups are merged in Canada?
And, one of the reasons printer sales are declining is the fact that most business want a managed print contract. That’s a service that usually the channel offers up to customers using HP printer equipment. If HP offers more managed print services directly to large accounts how will the PSG team handle that?
Way too many questions that need answering.
Follow Paolo Del Nibletto on Twitter: @PaoloCDN.
