Rumored HP PC and Print Merger a Boon for Channel Partners?

Hewlett-Packard’s reseller channel partners could stand to gain if the giant computing vendor merges its PC and print divisions, as the Wall Street Journal reports HP is considering.

Lagging printer and ink sales industrywide have meant tougher times for the industry overall, HP’s channel partners included, as much of those sales of print consumables such as ink cartridges go through the company’s reseller partners, not through direct sales.

But if HP merges the two divisions, that could set the stage for tighter integrations and  more bundling of offers of PCs and printers—something that would increase the total sale to the end customer and lock the customer into buying HP consumables.

“I think we’ll be seeing more tightly packaged deals in terms of integrating printers with PCs,” says Charles King, principal analyst at Pund-IT. “It wouldn’t surprise me to see additional peripherals bundled with PC sales, such as wireless network devices and other peripherals, too.”

Resource Library:

HP could enjoy an advantage over other PC vendors in employing such a strategy because it manufactures both the PCs and the printers. Other PC vendors generally resell the printers of other vendors.

The rumored HP change comes as the print industry is going through what some observers believe is a fundamental change, and not just a recessionary dip. That’s because more people are believed to be opting out of printing and instead storing documents electronically. If true, print sales may never recover.

The Wall Street Journal article points out that 70 percent of HP’s profits came from the print division in 2004, but today only 30 percent do. That’s a big difference.

But just unifying the PC and print divisions won’t necessarily guarantee success. When the PC division was floundering a few years back, HP under then CEO Carly Fiorina tried the same approach of marrying those two divisions together.

“They tried this under Carly Fiorina, and it didn’t go very well because [the head of the print division Vyomesh 'V.J.' Joshi] really had no interest in running the PC division,” says Rob Enderle, principal analyst at The Enderle Group.

This time the rumors say that HP will name the current leader of the PC group, Todd Bradley, to run the merged group. HP CEO Mark Hurd hired Bradley, the former CEO of Palm, four years ago. Joshi is an HP veteran who has led the print division for the past eight years.

“Todd has a broader background and likely could span the organizations, and it would put him clearly in line for Mark Hurd’s job as kind of a mini-CEO,” Enderle says.

Such a move would also likely consolidate a number of functions for the sake of efficiency, including channel management, says Enderle.

“Large-scale printers would likely retain their unique channel attributes, but office and desktop printer channel organizations would likely merge with their PC counterparts over time for efficiency,” he says. “They clearly would work to minimize disruption of the channel but might use this as an opportunity to shift focus to channel partners who were high performance and relatively loyal and away from those that aren’t producing and aren’t very loyal.”

But making the unification of the divisions attractive to channel partners will be crucial to HP’s ongoing success, according to King.

“It’s imperative that the company bring the channel along if they pursue a reorganization as fundamental as this one,” he says. “I would hope that they have been keeping the needs and benefits of the channel in mind as they move ahead with this. If they don’t, they are being very foolish.”