HP Cuts Back on Contract Manufacturing Providers
HONG KONG (Reuters) - The printing division of Hewlett-Packard Co (NYSE:HPQ), the world's largest PC firm, has been cutting down on the number of contract manufacturers it uses since the downturn hit in 2009, a senior executive said.
Cost savings derived from simplifying its supply chain had gone into spending on research and expanding its sales team, Vyomeh Joshi, the global head of HP's imaging and printing division, said in an interview in Hong Kong late on Monday.
"When the economy was doing great, we were shipping more and more units, probably we were not efficient," Joshi said, but declined to name specific companies. "So when the economy went down and people were delaying buying decisions, we took a look and said we don't need all this."
Many top technology brands such as HP and Apple do their own design work in-house, but outsource the labor-intensive manufacturing process to companies such as Hon Hai Precision Industry Co and Flextronics International, which run large facilities in low-cost countries.
HP's imaging and printing division is one of the company's most lucrative businesses, accounting for about a fifth of its revenue but about a third of its operating profit.
It is launching a series of web-enabled printers in Asia that will allow users to print remotely from mobile devices such as an iPhone or a laptop PC.
The new products would help the company meet its previously announced target of double-digit percentage growth in the number of printer units sold this year, Joshi said, with about 2,500 companies already customers of its printing solution business.
"What we need to do is to continue to capture all the pages -- that's how we can continue to grow," Joshi said.
HP APP STORE
Like peers Nokia and Apple, Palo Alto-headquartered HP will launch its own version of an app store designed to work with its printers, enabling customers to print directly from the app.
The company will take 30 percent of the revenue gained from the store, with 70 percent going to the software developer.
"If we try to develop all the software from the U.S., it's going to take years," said Joshi, who has been with HP since 1980. "Because we are making it open, there'll be some smart young kid in college who'll figure out what is the best thing for printers."
Joshi also rubbished talk that the printer was on its way out as more people begin depending on computers for their communication and learning needs, and amid concern that increased use of paper was causing deforestation.
"Do you think this computer is more green than that?" he said, as he waved a piece of paper. "It is not. People are missing the whole point. This (paper) is more green than anything else."
(Reporting by Kelvin Soh; Editing by Chris Lewis)