Last week for the umteenth time, Hewlett-Packard (HP) announced that it was reorganizing its divisions.
In this instance, it is blending the Personal Systems Group (PSG) with the Imaging and Printing Group (IPG). This stuff is insider baseball, HP palace politics, but nonetheless, a whole slew of tea-leaf-readers follow and interpret these intrigues before, during, and after they unfold.
The mingling of the PSG and IPG assets is a redux, mirroring the same strategic maneuver executed by Carly Fiorina in 2005 for somewhat similar reasons, but with the opposite structure. Then, briefly, Vyomesh Joshi (known as “VJ”), the now-former head of IPG, took over the whole ragbag for a few months. Looking back, it was perhaps his grandest moment. Former CEO Mark Hurd pulled the two divisions apart soon after he took over from Fiorina.
This time, however, under brandy new CEO Meg Whitman, VJ was shown the door, and Todd Bradley, long suffering head of PSG, got the nod to run the combined show.
Bradley will finally get his day in the sun.
And none too soon, either. Bradley’s patience with HP has thinned over the past several years, as it passed over him for the top spot twice and even, under the short-lived regime of Leo Apotheker, considered dumping PSG entirely, labeling it a “commodity business,” a diss from which Bradley — not to mention the division itself — has barely recovered.
His sunshine will last for only a day, though. Tough work lies ahead. But the outlines of the reorganization are becoming clearer nonetheless.
IPG has long been a hearty contributor to HP’s top and bottom lines, and still is, but its margins have halved in recent quarters. Revenue growth is stagnant with maybe a hint of decline.
PSG is the largest contributor of revenue to the company, but its margins are lower than IPG’s, an indicator, perhaps, of the fact that PSG has many competitors and that IPG stands nearly alone at the top of the printing-and-imaging pyramid. Selling ink by the bucket is still a great business.
PSG’s revenues are off, and its margins, under pressure, but some of this performance could be attributed to Apotheker’s premature announcement of the division’s death, which was made before — and was certainly a major factor in — his own invitation to walk the corporate plank.
Despite their relative positions, PSG has a more obvious future than IPG. HP has become known as one of the better makers of all-in-one desktops, those sleek concoctions that combine the computer “works” with the display into a monolithic unit. Arguably, all-in-ones will account for a rising proportion of future desktops, since the “works” will continue to get smaller while the requirement for a display larger than is practical for a portable machine will remain for some users.
Meanwhile, Intel is reinvigorating the notebook category with its Ultrabook push, creating extremely thin, light designs that boot and resume quickly, deliver a high-performance experience, and offer all-day battery life.
Tablets — at the moment ceded to Apple, which got off the blocks before the rest of the racers had even bent over — will get a rejuvenating injection when Microsoft brings out Windows 8 later this year.
So, there is something to look forward to in PCs. Not so much in printers.
I sat with VJ for 45 minutes at IPG headquarters in San Diego last October, at which time he articulated the division’s way forward. He spoke of scanning and printing as on- and off-ramps in an otherwise electronic workflow, one which HP could help manage — even as it tried to convince people to get off once in a while to print something.
As I thought about his departure last week and that day I spent with him and his lieutenants, I looked around my office at the gifts I received during my visit. One was a beautiful print of a 35mm slide that I had taken in the mountains of Northern Italy in 1986 and subsequently scanned with a Nikon CoolScan high-resolution scanner. With Adobe’s PhotoShop, I took the 65MB TIFF file down to something more manageable, a 2MB jpg. No detail of the gorgeous analog original was lost.
The print was done on paper textured to look like canvas, and the form was stiff and foldable so that after the print was made, it could be formed into a shallow box that looks a bit like a real framed painting. One great gimmick is that the edges of the photo are replayed on the sides of the box so that one sees the photo from all angles, although details at the edge are repeated. Still and all, the effect is lovely.
The other gift was a photo album. At a kind of rest station on the factory/office floor where employees can go to do printing tasks for free, my guide took a handful of digital cam shots of my boy and a friend, which I happened to have on my notebook, printed out 4x6s and 5x7s, and, with an auto-compose tool, set them in a nice book, which I took home.
The thing about these two charming items is that they represent corner cases in printing: high-value-add processes that one might do on occasion, but not every day.
Contrast that with what I used to find next to the (HP) printer when I worked at IDC in the mid-2000s: literally hundreds of abandoned Web pages and emails, printed by people who thought that they needed them and then forgot about them in the general insanity of the moment. Clearly, those printouts weren’t as important as their originators thought when they hit the “print” button because they managed to get along without them.
Information has exploded. Trees are rarer. Printing doesn’t scale. People save files or indices to places on the Web to find things nowadays.
So, printing is in decline, retreating to specialized applications, and PCs have a way forward, albeit a difficult one.
What these two businesses share in common is that they are not on the strategic main boulevard of the company, which sees itself growing further as an enterprise solutions provider akin to IBM. HP still has work to do building its software side, but its enterprise hardware and services are already world class. The enterprise business has both growth and healthy margins, good reasons to focus investment on it.
What’s ahead for the combined IPG-PSG unit? Clearly, cost cutting. No headcount reduction number has been announced, but it is likely to be significant.
Otherwise, product-line simplification. From Apple, other companies are learning the benefits of a simple product line. HP has far too many products in both IPG and PSG, and each one comes with its own personnel and cost structure.
The benefits of simplification will be lower costs and better focus. The drawback is that a lot of people will lose their jobs.
Disclosure: Endpoint has a consulting relationship with Hewlett-Packard.
© 2012 Endpoint Technologies Associates, Inc. All rights reserved.
Twitter: RogerKay
