Archive: March 1999 — HP calls it splits

HP wagers 50-year heritage on divided business model

So much time has been spent over the past two years discussing HP’s attempt to bring something together — its mega-merger with Compaq — that it’s

easy to forget about its effort to split itself up.

In an effort to boost profits, HP said it would spin off its test and measurement business so that could bring more clarity and focus to its PC and printer side. The latter division kept the HP name, while the measurement operation was given a new brand, Agilent. At the time, HP Canada’s president likened the move to spin-offs within General Electric and AT&T Canada, but analysts saw the strategy as a way for the vendor to concentrate on its ailing IT equipment sales.

Ironically, HP’s decision to buy Compaq would trigger pot-shots from experts who said the company was losing focus by getting together with a company that had so much overlap. HP’s chief executive, Carly Fiorina, is still trying to prove the skeptics wrong.

Compaq to set rules
Reseller furor over direct sales plans prompts PC vendor to clear the air

Though it’s no walk in the park to remain profitable in the reseller market today, the channel faced a particularly rough ride four years ago, when some of the best-known vendors made some very indirect moves.

Compaq, for example, announced formal “”rules of engagement”” as part of a hybrid sales model in which it said it would continue to use VARs while adding a direct sales component. Many resellers said they first heard about the changes from reading CDN, which left them bitter over the lack of communication on Compaq’s part. Executives later admitted their mistake. “”It seemed out of the blue,”” said Ken Price, who managed Compaq’s channel marketing at the time.

Not long afterwards, Big Blue was ruffling feathers in the channel by announcing an OEM agreement by which it would supply direct PC maker Dell with equipment over a seven-year period. IBM had just wrapped up its PartnerWorld conference in New Orleans, so the news took several VARs by surprise. “”My first reaction was to be scared,”” one told us.

Financial troubles prompted some changes at Monteal’s Matrox Graphics, which cut the return rate for some of its boards by setting some strict policies. The company said too many of the products were being returned due to problems with hardware, despite the fact that specific faults could not be identified. From then on, resellers had to send the boards back within 75 days.

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