HP Partners Welcome Decision To Keep PC Business

Hewlett Packard partners Thursday cheered the company's decision not to sell or spin off its $41 billion PC business.

HP's move to keep its Personal Systems Group as a part of the company, instead of selling it or spinning it out as a separate company, ended months of speculation about the company's plans for its PC business.

"HP came to their senses," said Sam Haffar, president and co-CEO of Computex, one of HP's top partners headquartered in Houston, Texas. "All I would say is they finally made a good decision. This takes away all the distraction (around the PC business) we had to deal with from customers (concerned about a possible HP PC spin off or sale). It was very hard to close PSG or ESSN deals with this hanging over HP's head. Now, it is behind us and we can move forward. It is going to help us win more business with both PSG and ESSN (Enterprise Servers Storage Networking)."

HP's PSG decision ends the uncertainty that began when former HP CEO Leo Apotheker announced on August 18 that the computer giant was considering "strategic alternatives" for its PC business. That announcement stalled a number of HP PC and enterprise product purchases that were in the works, according to solution providers.

HP is the world's largest PC vendor, and PSG generates over $40 billion in revenue and $2 billion in profit annually. It is also a crucial part of HP's being an end-to-end provider of IT to customers, which is one of its primary competitive advantages, HP solution providers said.

HP solution providers called HP's decision a chance to clear up confusion in the market and go back to business as usual.

Rick Chernick, CEO of Camera Corner Connecting Point, a Green Bay, Wis.-based solution provider and HP partner, said he is glad the PSG uncertainty is over.

"HP really threw up on themselves (with its planned change in PSG)," said Chernick. "Now we need to see how HP will clean it up. I'm a positive person. Now it's back to business as usual. Let's go out and get some new customers."

Getting the PSG uncertainty out of the way is a huge boost for partners, Chernick said. "All this talk of a PC spin-off hurt HP. We all know it was stupid. Now we have to move on. HP has to regain market share and gain back the loyalty of their resellers."

Next: Back To Talking Business, Not Vendor Issues

Chernick said keeping the PC business in-house opens the door for him to go after two large PC deals that were in a "holding pattern" until HP made a decision. "Now I have a shot at winning that business," he said. "I think with (HP PSG Executive Vice President) Todd Bradley's commitment, dedication and hard work we are going to be in great shape going forward."

Rich Baldwin, CIO and chief strategy officer of Nth Generation Computing, a San Diego-based solution provider and HP partner, said uncertainty over HP's PSG plans was the main topic of conversation among HP partners at UBM Channel's Best Of Breed (BoB) conference this week.

The consensus among the HP partners was that HP would keep PSG, Baldwin said.

"Our feeling was based on the way the world responded to HP's decision, and on (HP President and CEO) Meg Whitman's wanting to come to a decision quickly," he said. "It's good news. It shows HP is looking to the needs of both its customers and partners."

It's a good decision for HP for at least the short term, said Chris Case, president of Sequel Data Systems, an Austin, Texas-based solution provider and HP partner.

"There was no reason to drop it in the first place," he said. "PSG generates $2 billion in profit. Why throw it away? Things may change, and we can't predict the future. But PSG is good for HP, and it opens customer doors for us."

Case said that HP's original decision to seek strategic alternatives for PSG was one of the worst decisions he has seen in his 13 years in the IT industry. "I wish HP had never made the decision public," he said.

However, now that PSG will remain part of HP, it will clear up a lot of FUD, especially from rival vendor Dell.

"It will help keep Dell out of our accounts," he said. "It will stop the FUD. We saw some deals slip recently. But this will help customers regroup. Once customers get the word, we can get back to selling and not explaining to them what's going on."

John Convery, executive vice president of vendor relations and marketing at Denali Advanced Integration, a Redmond, Wash.-based solution provider and HP partner, called the move a big positive for HP and its partners.

"I'm a happy camper," Convery said. "The cloud this brought to HP and its partners has been lifted."

Next: HP's PC Business A Key Channel Play

Convery said he looks forward to HP's PSG sales remaining a part of the vendor's Partner One channel program.

"We can leverage PC sales with Partner One," he said. "This gives us the ability to talk to customers about everything from the cloud and the data center to the desktop. It's to HP's advantage to keep the mothership intact."

The decision to keep PSG shows that Whitman has taken a leadership role at HP, Convery said. "This shows she's not hesitating," he said. "It's a good sign of her leadership."

During an analyst conference call following Ingram Micro's third-quarter financial report, CEO Greg Spierkel called HP's decision a big positive for the industry and channel.

"We just were talking about it before coming on to the call," Spierkel said. "It was somewhat anticipated. We've had discussions with a few senior people in both Europe and North America in the last few weeks. All the body language was that it was likely to stay. Most people we're saying that it's a good thing for them internally.

Ingram Micro has so many intertwined systems, programs, and initiatives with HP ranging from print to servers to the PSG division that a pullout from the PC business would have lead to major transition issues for the industry, Spierkel said.

"But now going forward, it's business as usual there, subject to any changes a new CEO might bring," he said. "We're pleased. [Shedding PSG] was something that would probably have been a challenge a few quarters out when changes did take place, but at this stage it's all water under the bridge now."

By keeping PSG, HP is also keeping its valuable supply chain intact, which solution providers called crucial to the vendor.

The move makes sense from a volume and supply chain perspective, Baldwin said. "Why give up something when you're number one at it," he said.

The supply chain question was an important issue, Baldwin said. "I was concerned about HP's supply chain and how it would impact costs," he said. "So this is good news. HP will have the best cost structure by keeping its supply chain intact."

Convery pointed to the ongoing floods in Thailand which are wreaking havoc on the hard drive industry as an example of the importance to HP to have a large, intact supply chain.

"Just look at the hard drive shortage," he said. "HP has the clout to survive it. If there's a shortage, who has the biggest stick? HP can deliver on its supply chain advantage."

Next: No Lasting Impact Expected From HP's PSG Confusion

The last couple months of indecision on HP's part about PSG is expected to blow over quickly with no lasting impact on customers or partners, solution providers said.

How customers view HP depends on the value and solutions the vendors provide them, Convery said.

"HP is still the only manufacturer with an end-to-end solution," he said. "Customers understand that. Between its products and R&D, HP is in a good position."

Chernick said his company didn't lose any customers because of HP's considering of strategic alternatives for PSG, and that any drop in PC sales was more a factor of declining budgets than anything else.

"But for net new business, we had been trying to get customers to switch to HP," he said. "That had been on hold. It's still salvageable. Now I'll be calling them, singing my song and trying to get them down to HP's customer service center in Houston."

Getting new business for HP ultimately depends on pricing and programs, especially after the confusion about PSG, Chernick said.

"We'll see what's HP's next move for PSG," he said. "What will they do to make it attractive to customers, what marketing programs will they put in place to get us more excited about recommitting to them?"

Customers are still loyal to HP, Baldwin said. "I don't know that the desktop business is so great that the last couple months would cause customers to jump ship," he said.

Steve Burke, Scott Campbell, and Chad Berndtson contributed to this article.