HP Plan to Split Company Creates Channel Uncertainty

By Michael Vizard  |  Posted 2014-10-06 Email Print this article Print
 
 
 
 
 
 
 
HP split

NEWS ANALYSIS: Time will tell how HP's split into two companies will affect channel companies in the long run. But they should keep their options open.

With the planned division of Hewlett-Packard into two separate companies, there is now more uncertainty in the HP channel than ever. While it will probably be business as usual for at least the next year or more in terms of individual customer transactions, the fact that the HP PC and printer group and the enterprise systems group will become separate companies in about a year raises a whole range of new possibilities.

For example, the two new companies—Hewlett-Packard Enterprise and HP Inc.—could, in theory, wind up being acquired separately. In fact, HP has already reportedly engaged in off-and-on merger and acquisition discussions with EMC over the past year, while at the same time discussing the possibility of acquiring the VMware unit of EMC. At the other end of the spectrum, either company could be acquired by venture capitalists and taken private.

Meg Whitman, who will serve as CEO of Hewlett-Packard Enterprise, said it will take a year to divest the two companies. Dion Weisler, currently head of the HP printer unit, will be the new CEO of HP Inc.

From a channel perspective, both companies will establish an operating agreement that will allow them to go to market together, when appropriate, Whitman said, noting that both companies will continue to make use of the HP Unison Partner Portal platform.

Addressing investors today during a conference call, Whitman said the primary reason for splitting HP up is that two companies will be much more nimble than a single, unified HP. In fact, both will still rank in the Fortune 50. Even so, both will be also significantly smaller than rivals such as IBM and EMC.

Pete Busam, managing member of Equilibrium Consulting, an IT channel consulting firm, said splitting HP up isn't likely to have an immediate impact on the behavior of HP channel partners—some of which are totally loyal to HP, while others prefer to mix and match as their customers see fit. The real potential issue will not necessarily be in the enterprise, where PCs and IT infrastructure are generally sold separately, but rather in the small and midsize business (SMB) space where they are almost always sold together.

"I can see how each of these businesses might become more nimble," Busam said. "Then again, a lot of customers and partners like to have one throat to choke."

In fact, Busam noted that not only does the splitting of the two companies reverse the "better together" strategy that HP had been pursuing ever since Whitman became CEO; it's also the opposite strategy to what both Dell and Lenovo are pursuing in terms of PC and server sales.

After three years of pursuing that unified strategy, HP now has a strong enough balance sheet to allow the two business units to go forward on their own separately, Whitman said. HP Inc., as a combined entity consisting of the HP PC and printer business unit, is a much stronger financial entity than when HP earlier considered spinning off the PC group three years ago, she said.

It's still too early to predict exactly how two HP companies will play out in the channel. But the one thing that is for certain is that, given all the volatility in the market as it relates to mergers and acquisitions, solution providers might be well advised to keep their options open.

Michael Vizard has been covering IT issues in the enterprise for 25 years as an editor and columnist for publications such as InfoWorld, eWEEK, Baseline, CRN, ComputerWorld and Digital Review.

 
 
 
 
 
 
 
 
 
 

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