HP's reorg: Enterprise carries the team

HP's reorg: Enterprise carries the team

Summary: HP's decision to combine the PC and printer businesses has created a tale of two companies---consumer and enterprise. The latter wins.

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HP's move to combine its PC and printer units effectively created two companies focused on the consumer and enterprise. The latter is likely to represent the growth going forward.

The combination of the PC and printing groups was billed as a way to save money, improve service and drive innovation. A skeptic could also argue that HP was combining two units that face some potholes ahead. The combination of the post PC and digital eras mean so-so computer, printer and ink sales.

More: HP combines printer, PC units; Analysts question synergy | CNET: Can HP really drive PC and printer innovation?

Indeed, HP's fiscal 2011 was already the tale of two companies. HP's PC unit's revenue for the year fell 3 percent. The printer unit showed no growth. The PC and printer units combined delivered 2011 operating income of $6.32 billion on revenue of $65.36 billion.

Now compare that sum to HP's enterprise parts---services, hardware and software: 2011 operating profits of $8.87 billion on revenue of $61.4 billion.

Obviously, HP's enterprise business is more profitable. It is also delivering better growth. HP's enterprise, servers, storage and networking business grew revenue 9 percent for the year; software was up 9 percent and services up 1 percent.

In other words, HP's decision to combine the PC and printer divisions may have been more about creating a slow-growth half of the company. HP's future market cap is likely to be pegged to the enterprise side of the business.

How HP values the two sides of its business will be reflected in future research and development investment. One guess: The investment will flow to the side carrying the team and that's the enterprise side of the house.

Topics: Printers, CXO, Hardware, Hewlett-Packard

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  • Makes sense

    I actually think Leo Apotheker was right to want to spin it off (but I would have sold it to the public, not tried to find a private buyer for it). Given that it wasn't, I think the next best thing is exactly what HP has done, except that I would have revived Palm and put it in the consumer products division.

    Next step is to make services (aka EDS) a wholly owned subsidiary.
    John L. Ries