HP has confirmed this morning that it will merge its Personal Systems Group with its Imaging and Printing Group. Yesterday a published report indicated that Hewlett-Packard (NYSE:HPQ) was about to combine its two biggest divisions.
The new group will be called Printing and Personal Systems Group and will be run by current PSG worldwide boss Todd Bradley. As a result of the restructuring, long-time HP veteran Vyomesh Joshi, who has spent 32-years with the company and leads IPG, is leaving the organization.
Joshi was one of the keynote speakers at last month’s HP Global Partner Conference in Las Vegas where he encouraged channel partners to move up the printing technology stack to gain more profits. Last quarter revenue for IPG fell by seven per cent in commercial and consumer segments.
HP said that by merging the PC and printer units, it will streamline its supply chain, achieve cost savings will be better able to reinvest in the business.
“This combination will bring together two businesses where HP has established global leadership,” said CEO Meg Whitman. “By providing the best in customer-focused innovation and operational efficiency, we believe we will create a winning scenario for customers, partners and shareholders.”
One senior executive from Canada told CDN that this move is a good one for HP and its partners because the new organization would be better to deal with than the two.
Another senior executive from Canada said this move was not a surprise as HP has been looking to cut costs more aggressively based on their earnings results.
CDN has left several messages with HP Canada executives for comment on this breaking news. We’re still waiting for a response.
If the same sort of restructuring were to occur in the Canadian operation it would impact the roles of Lloyd Bryant, who heads IPG in Canada and Leyland Brown, head of PSG in Canada. Brown was named CDN’s Top newsmaker last year.
If this change were to happen it would mark the second significant restructuring of IPG in a year’s time. In 2011, Bryant reshuffled his staff at IPG Canada. Many of those changes were sparked by the pending departure of Janet LeMare, who is retiring as vice-president, managed enterprise services (MES) after a 22-year career with HP. Gary Drysdale took her place, while Serge Leger, Anita Grassl, and Patrick Harrison got new roles.
This move marks the first sweeping change at HP since former eBay chief Meg Whitman took over as CEO last September. Whitman was brought in to right HP’s ship after the company replaced two CEOs in a little over a year and appeared to lose its direction.
HP’s Personal Systems Group, which makes its PCs and laptops, is the biggest division at the company, pulling in $8.9 billion in revenue last quarter. The Imaging and Printing Group, traditionally one of its most profitable groups, brought in $6.3 billion. Together they account for about half of HP’s total sales.
Combining the divisions might make sense since there’s a lot of overlap in terms of customers and how the two groups market and sell products, said NPD Group analyst Stephen Baker. “In that sense there’s probably a lot of synergy,” he said.
While selling ink cartridges has been a profit driver for HP, PCs and printers are both essentially commodity hardware businesses, he said, meaning there’s overlap in how they should be managed. An exception is HP’s commercial printer business, which might not fit so comfortably in the PC division.
HP considered a similar plan several years ago, Baker said, but at that time it was the PC division that would have been moved into the printer group.
Nowadays, HP may see better long-term prospects for its PC division, said analyst Roger Kay at Endpoint Technologies. New form factors such as ultrabooks and tablets are keeping the PC market alive, whereas people print less documents these days and printer sales are declining.
“The growth just isn’t there, and as HP looked out in the future I think they’re not seeing it there either,” Kay said.
The printer business has been a lucrative one for HP historically, and financial analysts have urged HP in the past to spin it off into a separate division. But the group’s profit margins are not as high as they once were, Baker said.
The operating margin for HP’s printer division last quarter was 12.2 per cent, down from 17 per cent a year earlier. Both the PC and printer divisions reported declining sales last quarter.
In addition to combining PSG and IPG, HP also is taking steps to unify and streamline certain key business functions.
The Global Accounts Sales organization will join the newly named HP Enterprise Group. This group will be led by David Donatelli and includes Enterprise Servers, Storage, Networking and Technology Services.
The new structure is expected to speed decision making, increase productivity and improve efficiency, while providing a simplified customer experience. A new role for Jan Zadak, executive vice-president for Global Sales, will be announced at a later date. Zadak will work with Donatelli to ensure an orderly transition.
HP also announced that it will unify its marketing functions across business units under Marty Homlish, executive vice-president and chief marketing officer, HP. This will allow for even more effective brand-building and marketing activities, and will create efficiencies across the business units.
HP’s Communications employees worldwide also will be similarly unified under Henry Gomez, executive vice-president and chief communications officer, HP. Together these two moves will create a more powerful voice to demonstrate the power of “One HP.”
Finally, HP is moving the Global Real Estate function from Finance into Global Technology and Business Processes to address real estate consolidation and improve the workplace experience for HP employees.
With files from James Niccolai of IDG News Service.