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HP to merge printer, PC arms in revamp

Mar 21 2012 14:27 Reuters

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San Francisco - Hewlett Packard Co CEO Meg Whitman plans to combine the computing giant's PC and printing divisions in a major internal overhaul intended to spur combined sales of hardware to customers, two sources familiar with the move told Reuters.

That reorganization, expected to be announced "soon," would see printing division chief Vyomesh Joshi step down and current PC chief Todd Bradley head up the combined unit, the sources said on condition of anonymity, because the information was not yet public.

Chief Executive Officer Whitman is looking to streamline the organization to make it easier for customers to buy the two products together, and to reinvest any savings into research and development, one of the sources said.

HP, the largest U.S. technology company by revenue, is struggling to keep its core personal computing business in the black as mobile devices from tablets to smartphones eat into sales and is trying to reinvent itself as a major enterprise computing provider.

The decades-old corporation, often mentioned in accounts of the founding of Silicon Valley, has been through its share of turmoil in past years.

HP considered for months last year a proposal to sell or spin off its PC arm, known as the personal systems group. That emerged as the company announced it would get out of the business of making tablets with the failure of its TouchPad.

But after Whitman's predecessor and former CEO Leo Apotheker was himself ousted in September for failing to revive a moribund stock, the company abandoned the idea and deemed personal computers core to its overall strategy.

HP's moves evoked a mixed response from analysts. While they felt Whitman was moving at an impressive speed to fix issues at the company and jump-start growth, the advantages of the integration were unclear.

"It's too early to tell what this is going to do," Sterne Agee analyst Shaw Wu said. "The risk I think is that both (divisions) have very different business models."

A mobile world

Earnings plummeted 44% in the fiscal first quarter and revenue slid 7% as the once-storied institution -- which has changed CEOs twice in recent years -- struggled to galvanize computer sales.

The most recent move is intended to reap the synergies of two divisions whose hardware products are often sold side-by-side, said the second source familiar with the plan.

The company feels it makes more operational sense to integrate the two with combined product offers, the source said.

"Meg Whitman is moving quickly to institute changes, e.g., fewer silos, greater emphasis on R&D, more conservative expectations," ISI group analyst Brian Marshall said. "Last week, we meet with the head of HP Labs and were impressed with the new organizational focus/direction put in place by CEO Whitman."

While HP still leads the market in PC sales, growth of that division has been dwindling as mobile usage takes off across the globe.

Bradley would be overseeing the largest division within HP. Last year, the printing and PC group pulled in $65.35bn of revenue in fiscal 2011. A former CEO of Palm, which HP acquired in 2010, he had previously been considered for the top job at HP following the ouster of Mark Hurd as CEO in 2010.

Joshi, a veteran HP executive, would be stepping down after about 31 years at the company. He joined HP in 1980 as a research and development engineer.

Tech blog AllThingsDigital first reported on the reorganization.

The company declined to comment on the report.

Shares in HP slid 1.2% to $24.04 in afternoon trade.
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