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HP Initiates Much-Needed Reorganization

3/26/2012 12:01:00 AM Eastern
PALO ALTO, CALIF. – Hewlett-Packard’s decision to merge its printing and PC groups was a necessary move to help the company remain competitive, industry analysts said.

HP announced the move on March 21, with CEO Meg Whitman stating that the intention is to unify as many of HP’s segments under one roof as possible in order to reduce costs and increase profitability.

The new group will be called the printing and personal systems group and will be headed by Todd Bradley, who was executive VP for the personal systems group. Vyomesh Joshi, executive VP of the imaging and printing group, will retire, ending a 31-year career at HP.

“HP’s move is the logical outcome of the increasing commodity status of both product categories. With large numbers of customer and product supply- chain synergies, it makes sense to combine the two organizations to take advantage of that and try to leverage a tighter go-to-market connection into increased sales opportunities,” said Steve Baker, industry analysis VP for The NPD Group.

Melding the two groups together will be no easy task, said Jack Narcotta of Technology Business Research (TBR).

“TBR believes HP will encounter competitive challenges through the consolidation in the near term, as most organizations would when coordinating the merger of two large divisions. We expect it will take time to establish effective resource sharing and allocation between the units. During this time, HP will be susceptible to competing vendors looking to capitalize on partner relationships. It will also take time before customers see noticeable benefits of products that work better together,” he said.

Whitman agreed with the analysts.

Addressing company stockholders on March 21, she said HP’s internal problems cross all the company’s divisions, and the company’s expenses must be brought under control.

“We need to change our fundamental processes and get our cost structure under control. The reorganization is a perfect example of this,” she told the stockholders.

Whitman described HP’s financial woes as serious enough to hinder the company’s ability to investment in itself and she added all expenses would have to be carefully scrutinized.

One area specifically pointed out by Whitman was marketing.

“We spend $4 billion on marketing, and I believe we can spend less and still do more,” she said.

Part of this move saw the company’s marketing programs being unified last week under Marty Homlish, executive VP and chief marketing officer. Homlish previously held the same position with SAP, which was purchased by HP. He was also a longtime executive with Sony.

Whitman also mentioned that the company had to reduce its complexity, specifically the number of product SKUs. She pointed out how each SKU had its own supply chain and support personnel, and said limiting the number of SKUs will help reduce costs.
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