Hopes high for HP spinoffs, but PC and printer concerns linger

Some HP customers worry about the future of the PC and printer business without the resources of the combined enterprise

Hewlett-Packard's plan to slice itself in two is being well-received by a cross-section of customers, though questions linger around PC and printer services and support.

Confidence is especially high in HP's enterprise business, and corporate users say they will stick with servers, storage and networking hardware from that side of the company. But customers are also putting the PC and printer organization under the microscope, reconsidering purchase decisions as the unit treads into a slowing market for personal computers and tablets.

The low-margin PC business has been a drag on HP for years now, and many customers saw the company split coming. Users are concerned that the level of service and quality of the PC and printer products may decline, given the spin-off won't have the financial resources and overall support of a larger, integrated company. There are already worries that HP will de-emphasize low-cost tablets and PCs in favor of premium products. Some customers also want to continue to buy PCs and servers from a single entity.

HP didn't waste time trying to erase doubts from the minds of key customers. Right after the company announced the breakup plan early Monday morning, Purdue University CIO Gerry McCartney got a call from his regular HP contact, who was ready to discuss the situation and answer questions.

The university spends millions of dollars on HP servers, PCs and printers every year, and McCartney believes the split is a good idea, especially if HP wants to preserve its enterprise business. But he's reserving final judgment.

"A year from now we'll know whether it was a good idea or not," McCartney said.

HP's PC and printer organisation will be known as HP Inc., and the enterprise business will be called Hewlett-Packard Enterprise. The split will be complete in 2015, and the companies are expected to work hand in hand to serve customers.

The last time HP pondered spinning off the PC unit was in 2011, when the division was foundering. The company was also struggling to absorb its acquisitions of smartphone maker Palm and enterprise software maker Autonomy. Then-CEO Leo Apotheker, who had engineered the Autonomy purchase, floated the idea of breaking up the company, and was attacked for proposing the idea without having a concrete plan to back it up.

Meg Whitman, taking the helm after Apotheker was booted out, reversed Apotheker's strategy and retained the PC unit. She is now convinced, however, that separation will help both units grow.

"Being nimble is the only path to winning. Separating into two companies will enable each management team to have a sharper focus," Whitman said during a conference call Monday.

News of HP's pending split won't affect Columbia University's computer science department's plan to buy servers, but purchase decisions for PCs and printers are being re-evaluated.

"We're not concerned about the spin-off of the enterprise section because that appears to be the strongest part of the company," said Daisy Nguyen, executive director of IT at the university's computer science department. "We are a bit concerned about the long-term printer and desktop products and services."

Nguyen has had a positive experience with HP, and also buys products for the department from companies like Dell. The department has around 300 HP servers, and there were plans to switch 40 desktops in a student lab to HP, but now those purchase decisions are being reconsidered following the news of the split.

There are also worries around printers.

"The printer division may not have the same level of funding after the split," Nguyen said.

Though Purdue University CIO McCartney thinks the breakup may improve the overall health of the separate HP companies, he doesn't want to deal with two separate organizations to buy products. He hopes the breakup of the company doesn't affect the relationships he has with HP's sales and support staff, who have a good understanding of Purdue's hardware requirements thanks to close bonds established over years.

"The part I don't care for is ... two companies to deal with for purchases," McCartney said. "It's a nice gesture to the market, but on the buying side, depending on how they implement it, it becomes a bit complicated."

Purdue buys PCs and servers from HP and even works with the company to develop supercomputers. The close ties help Purdue get good pricing and support, and McCartney hopes the PC and enterprise companies can effectively work together to be a one-stop shop for large customers.

"If I'm going to have different sets of people calling me, I wouldn't regard that as a good development," McCartney said.

McCartney says hybrids, tablets and even so-called phablets will ultimately replace PCs, and thinks he may have to turn to other vendors like Samsung for products.

"In the long arc, PCs as we know them are going to go away," McCartney said.

The PC industry, meanwhile, is shifting, with Sony exiting the PC business, Samsung stopping laptop sales in Europe, and Toshiba shifting focus to business laptops.

HP is going in the opposite direction of its top rivals. Dell has held on to its PC unit, and Lenovo, the world's largest PC maker, recently closed a $US2.1 billion deal to buy IBM's x86 server business. These companies maintain that PC sales act as a springboard to sell more server products. HP is the world's largest server maker, and has closely tied its hardware and software into packages sold to customers.

But for some HP customers who spend more on servers, it's business as usual.

For BCDVideo, which makes security and video analysis products, about 90 percent of HP hardware purchases are for servers, with the rest mostly workstations, which will ultimately go to HP Inc.

BCDVideo President Jeff Burgess is already dealing with separate PC and server sales teams, and believes the good experience he's had with HP so far will continue with the spin-offs.

"We're confident that we're going to keep the same sales and engineering contacts on the back end," Burgess said.

Burgess appears certain the company won't give up on workstations, which will be important moneymakers for the PC spin-off. Some HP workstations are used as low-end servers and also run server chips.

Another HP customer, big-data software company PROS, expects little change in its day-to-day engagements with the vendor, even after the breakup, and has no plans to change its course on technology purchases. The company uses HP servers and PCs, and expects a smooth transition.

"We have open communications regarding HP's strategic plans on new technologies, which is important for our long-range planning and a key component in our relationship," said John Salch, vice president of technology and platforms at PROS.

In fact, the HP breakup may place the new companies in a better position to compete in their respective sectors, Salch said.

"We're encouraged by comments we've read from CEO Meg Whitman this week, referring to how this change will enable both companies to move faster to take advantage of their customers' changing needs," Salch said.

Agam Shah covers PCs, tablets, servers, chips and semiconductors for IDG News Service. Follow Agam on Twitter at @agamsh. Agam's e-mail address is agam_shah@idg.com

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Agam Shah

IDG News Service
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