HP shuffles to protect print-ink, server biz
March 21, 2012
Remember when the HP printer business drove the company's profits and revenues? As recently as 2003, the Imaging and Printing Group generated 55 percent of HP's income, an amount that led one IBM speaker at a 3000 conference to call HP "Inky." Today HP poured its printer and ink business -- which spews its profits from those $20 cartridges -- into the company's PC bucket.
At the same time that the declining fortunes of printing triggered this sea change, Hewlett-Packard sent its Enterprise Servers, Storage and Networking (ESSN) group into a much broader new segment, called the HP Enterprise Group. ESSN joins HP Technology Services (think consulting and cloud) and Global Accounts Sales -- which will be getting a new sales chief. Jan Zadak, a Czech EE with a Ph.D. from the Czech Technical University, is stepping down as Sales EVP after 10 years at HP. He arrived in the Compaq merger. David Donatelli, who joined HP in 2009 from EMC in a contested hiring, will lead Sales, Tech Services, and ESSN .
Few sales efforts in HP have battled headwinds as hard as the ones buffeting ESSN. It sells Linux and Windows servers based on the popular Intel Xeon family with some success, but also the HP-UX, NonStop and VMS environments that are subsisting on an existing base. Hewlett-Packard is working the IBM markets for new Unix installs. But that ex-mainframe business tends to go to Windows when HP succeeds, as it did at Yale-New Haven Hospital not long ago. The hospital wasn't replacing its HP 3000s, by the way.
The slackening sails of printer and ink sales pulled EVP Vyomesh Joshi into retirement. Known as VJ during his 32 years at HP, the executive also arrived with an EE degree, going to work in R&D. He's on the Yahoo board of directors.
Todd Bradley, who joined HP from Palm Computing and took over PCs in 2005, now takes the helm on an HP vessel that analysts are calling "trailing business." It's market-speak for products in decline, and for the moment the decline is around printing -- selling at 2005 levels by now -- rather than PCs. But HP hasn't shown any more PC growth in the last three years than anyone else in the business not named Apple. PCs have been flat to declining. Bradley now is the king of the consumer end of HP, the one that former director Dick Hackborn puffed up through the '90s with retailed ink and printers, and in the early Oughts with PCs. The days of HP-branded music players, TVs and cameras as leading businesses are over. A single camera pops up on the HP website today, and the HP flatscreens are history, too.
It's not the first time the businesses have been combined. Carly Fiorina pushed the move through just a few weeks before HP ousted her in 2005. The replacement CEO Mark Hurd reversed the move soon after he arrived.
HP portrayed the combination of the ESSN business with Sales and Services as a way to "streamline certain key business functions." It's making these moves to "speed decision making, increase productivity and improve efficiency, while providing a simplified customer experience." HP still must cut its expenses to feed the refreshed R&D spending that Whitman said the company needs immediately. Streamlining can be corporate code for headcount reductions. A simpler customer experience can be handled by fewer employees in sales when there's less being sold.
The impact on the 3000 community from the HP moves will be limited to any sites which are still in the process of migrating their enterprise servers. Hewlett-Packard hopes the new setup will make it simpler to shift from HP 3000s to Integrity servers, for example. Or simply update storage and networking; the latter is one of the few spots that showed year over year growth in the latest HP report.