HP Tries To Rally Partners As Dell, Others Move Aggressively To Take Share

Todd Bradley, the executive vice president of Hewlett-Packard's $42 billion Personal Systems Group, joined other top HP executives Tuesday to try to quell solution provider concerns about the future of PSG and counteract the "FUD" HP claims is being spread by competitors such as Dell.

In a 30-minute conference call attended by more than 1,800 HP partners from the U.S., Canada and Latin American regions, Bradley promised partners "unwavering" support in terms of ongoing marketing and channel initiatives, and urged partners not to fall prey to challengers that are attempting to crack HP's tight partner relationships.

"I’m sure that our friends at not only Dell but people like EMC and Cisco and probably Lexmark are using this opportunity to try to crack the strength of our ecosystem, the strength of our partner relationships," Bradley said

HP will decide on what to do with PSG within eight to 12 weeks, Bradley said. If HP does spin out PSG, that company will be a very aggressive and profitable Fortune 60 company with a world-class management team, Bradley said.

The IT product giant last week shocked many partners by scuttling the TouchPad and revealing its intention to explore a spin-off or sale of PSG.

Taking aim most forcefully at Dell, Bradley declared that HP has "pounded" Dell in the PC business and claimed his competitor lack’s ’a vibrant channel."

"Clearly through all of our efforts, through HP’s product efforts, our marketing efforts, frankly through your go-to-market efforts, we’ve pounded [Dell] over the last six years. We’ve pounded them in workstations: We’re now No. 1 in the world, No. 1 in the U.S. We did that through innovation through engineering and through great products," Bradley said.

Bradley said that even if PSG is spun out as a separate company, it would still make a more compelling vendor partner for solution providers than Dell.

"If there’s any response to the FUD, [it's] look at the performance of Dell over the past six years. Look at the quality of their product portfolio, the lack of support, frankly the lack of a vibrant channel. I don’t know what’s going to change about that in the future. PSG’s not going to change. We’ll spin out as a $40-plus billion company committed to the channel and committed to our customers and frankly, committed to growing share profitably. My guess is they’re hoping that this is a challenge and hoping their lack of a solid value proposition will be overcome by this uncertainty in the marketplace today."

Michael Dell, chairman and CEO of Dell, mentioned HP in several posts on Twitter in the days following HP's revelation that it is exploring the potential sale or spin-off of PSG.

NEXT: Michael Dell Weighs In

Goodbye HP, Sorry you don't want to be in PCs anymore. But we do more than ever. How would you say goodbye to HP?," Dell said in a tweet on Aug. 20. "@HP PC business 100% committed to ownership change to new unknown owner(s) w/unknown strategy, on an unknown time frame," he tweeted later that same day.

In an exclusive interview with CRN Tuesday night, Dell said the company has seen high interest from solution providers since HP's disclosure.

"We have had great response from partners and tremendous interest from existing partners and potential new ones around the world since the news," he said. "Look at Dell. We are here to stay. We are committed. If you look at this whole x86 space, we are the x86 partner of choice. There is no other company that has a complete x86 portfolio."

EMC and Cisco were unable to provide immediate comment as of press time. Lexmark declined to comment

An HP spokesperson asked for comment after the call said the company wants partners to know it'll continue to assist them in selling HP’s complete portfolio of products.

"There is no change to HP’s technology innovation, channel strategy, partner programs, including PartnerONE, or sales engagement or customer service models," said the spokesperson.

According to the HP spokesperson, Tuesday's conference call was intended to address partners' questions and reaffirm HP's commitment to the health and future growth of its PC business. "Business partners and customers can expect us to be around for a very long time, spin-off or not," the HP spokesperson said.

Also on the call were: Stephen DiFranco, PSG senior vice president and general manager; Dave Donatelli, executive vice president and general manager of HP's Enterprise, Servers, Storage, Networking (ESSN) division; and Vyomesh Joshi (VJ), executive vice president of HP's Imaging and Printing Group.

Several of HP's top partners that listened to the call, who did not want to be identified, said the rallying cry from Bradley and other HP executives is not enough to save millions of dollars in PC business that has been thrown into jeopardy by the HP board's decision to go public with the possibility that the PC business could be spun off.

"There is nothing that was said on that call that is going to help me retain millions of dollar in the sales pipeline that has been put in limbo by the Personal Systems Group situation," said the CEO for a large HP enterprise partner. "Dell didn't create this FUD. HP created the FUD."

NEXT: HP Channel Partners React

The CEO for another HP partner, who also asked for anonymity, remained disheartened after the conference call. He said the uncertainty surrounding the PSG business is stalling sales. "They have spooked the market," said the CEO, who did not want to be identified. "This is not the channel's fault. Customers are telling us to bring them an alternative. Customers come first. We will continue to advise customers on what is in their best interest.

The CEO bemoaned all the "time and energy" being spent on the potential PSG spinoff rather than driving HP sales. "This is a major distraction," he said.

Another HP enterprise partner CEO, who also has a strong Dell relationship, said the uncertainty surrounding the HP PC business is causing "dramatic turmoil within the existing HP client base." He said Dell is going to "benefit tremendously" from the situation.

"Regardless of HP's statements, there is no certainty with regard to what is going to happen to the HP PC business," said the CEO. "If HP is really true to its PC partners and customers, they would be willing to step up and guarantee that they will be in the PC business for an extended period of time."

If there wasn't turmoil, HP would be sticking to its original statement around a potential PC exit strategy in the next 12 to 18 months."

Todd Swank, vice president of marketing at Burnsville, Minn.-based system builder Nor-Tech, which did only $20,000 in HP business last quarter, said he gets the impression from the call that "there's some division within the ranks" of HP regarding a potential PC spinoff. "My impression is that the people in charge of the PC business aren’t really happy with how this has been handled up to this point," said Swank. "I wouldn’t want to have to try to explain something like this to my customers when I don’t know how the story is going to end."

NEXT: Dell Channel Chief Offers His Views

Greg Davis, vice president of global commercial channels at Dell, said in a statement emailed to CRN that Dell’s strategy of providing a full range of products including PCs makes the company a strong partner to the channel.

’We continue to believe that there is real value in providing end-to-end solutions from the device to the data center," wrote Davis. "HP’s proposed actions are in contrast to Dell’s strategy to remain strongly committed to the PC business. We’ve proven that we’re a stable business partner for the channel and our message to our partners is, that won’t change – the PC business is strategic to Dell and we’ll be a consistent partner to them in the coming years.’

Analyst firm Gartner in July reported that HP was the No. 1 PC vendor both worldwide and in the U.S. during the second quarter of 2011, followed by Dell at No. 2 in both cases, in terms of units shipped. However, Dell's worldwide PC sales during the second quarter grew 3.3 percent over the second quarter of 2011, compared to HP's growth rate of 3.0 percent. But for the U.S. market, both companies saw shipments fall, with Dell's shipments in the U.S. dropping 9.8 percent compared to only a 1.2 percent drop for HP.

One HP SMB partner, who did not want to be identified, said he was disappointed after listening to HP's executives answer questions from partners. "There was nothing conclusive," he said. "The uncertainty out there is what hurts you. It is like going into a cave and not knowing what is coming. I think they are going to sell the PC business."

The partner said he believes HP has underestimated the importance of having a broad product portfolio from the desktop to the data center. "Customers like one throat to choke. They like buying desktops, servers, printers and software all from one company. The fear factor right now is everybody in the channel is starting to think this is strictly going to be a software company. I think this is going to affect server and SAN sales because customers don't know what HP is going to do."

Kevin McLaughlin and Joseph F. Kovar contributed to this story