Hurd on the Channel Street

Although Hewlett-Packard at the moment is riding high thanks to strong international and consumer sales, company Chairman and CEO Mark Hurd acknowledged at the company's annual partner conference a much bleaker picture when it comes to sales of IT equipment into corporate accounts in the United States.

According to Hurd, about 69 percent of the company's sales are generated from overseas markets. And of the remaining 31 percent, a huge percentage of those sales in the United States come from consumer PC and printer sales, which means that sales of enterprise computing products in the United States is a relatively small percentage of the company's overall business.

Hurd acknowledged this state of affairs during his keynote speech at the partner conference being held in Las Vegas Feb. 25-28 by imploring the company's channel partners to expand HP's reach, particularly in the SMB (small and midsize business) market in the United States, to help HP grow market share in what increasingly looks like a significant economic downturn. "The U.S. is a place we have to win," said Hurd.

Is HP showing signs of desperation? Read Sara Driscoll's blog here.

The CEO said it's imperative for HP to gain share in the coming year given the likelihood that that industry will see a decline in enterprise hardware spending. In particular, customers are delaying server upgrades because they are seeing higher server utilization rates on existing systems thanks to the adoption of virtualization technologies, while at the same time customers are trying to reduce the amount of raw dollars allocated to hardware infrastructure.

This double whammy creates an extremely difficult scenario for HP, which is relying on channel partners to grow its share of the enterprise computing market in the face of tough competition from not only IBM, Sun and Dell, but also from an increasingly vibrant white box server market. In addition, Hurd conceded that HP's ongoing missteps in the storage space have made it difficult for HP partners to make headway against rival vendors.

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Hurd seemed to acknowledge all this by tempering his usually tough talk about partner loyalty. While he stressed that HP still prefers to do business with partners that attach a lot of HP products to any given solution, he was more conciliatory to solution providers that found it prudent to sell products from other vendors alongside HP products.

Nevertheless, Hurd said he will continue to bristle over the issue of solution providers choosing to sell HP products at a loss as part of an overall solution that includes third-party products sold at a higher margin at the expense of comparable HP products.