HP launches major internal overhaul
(CBS/AP) PALO ALTO, Calif. - Hewlett-Packard Co. (HPQ) will combine its printer and PC divisions to save money, part of the technology company's effort to turn around its business.
The move announced Wednesday comes at a time when sales of printers and ink, once HP's lifeblood, are falling as people increasingly share documents and photos online. HP, the world's No. 1 maker of personal computers, is also facing declining PC sales as people turn their attention to tablet computers and smartphones.
The combined unit will be led by Todd Bradley, the executive vice president of the PC group since 2005. Vyomesh Joshi, the head of the printing group, is retiring after 31 years with HP.
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HP has said it needs to identify ways to save money to invest in growing businesses. The company said combining the units will increase productivity and efficiency, while streamlining customer support and the company's supply chain.
Shaw Wu, senior technology analyst at Sterne Agee, believes there's room to cut expenses, especially when it comes to administrative and marketing costs.
But he said that there's a limit. Customers don't necessarily want to buy computers and printers at the same time. People replace PCs much quicker than printers, which can last five years or longer.
HP didn't say how much it will save or what effect the restructuring would have on jobs, but the move is likely to result in layoffs. In a 2009 shake-up of the printing, PC and other divisions, HP cut 4,400 jobs. The company had 349,600 workers as of October, the end of its most recent fiscal year.
HP said combining the two divisions will improve its branding, supply chain management and customer support. Branding has been a challenge for Hewlett-Packard, a massive and storied technology company with a role in everything from computers to consulting.
Ultimately, HP will have to define the "big picture" of what the company stands for, Wu said. "What is HP?"
Unlike, say, Apple Inc. or IBM Corp., HP lacks an identity that people can associate with it, Wu said.
The restructuring is one of the first major steps taken by former eBay chief Meg Whitman since she became HP's CEO in September. Her predecessor, Leo Apotheker, had wanted to sell or spin off the PC business, a plan that contributed to his ouster after 11 months on the job. Later, under Whitman, HP said it plans to keep the unit.
Whitman inherited a faltering company that's facing growing competition and its own operational issues. She said last month that HP plans to spend several years turning its business around. This means addressing the internal problems as well as broader threats to its PC business from tablets and smartphones.
Revenue from the printing division has fallen 13 percent from a peak of $29.6 billion in fiscal 2008 to $25.8 billion for the most recent fiscal year, which ended in October. Meanwhile, operating profit of the printing division has dropped from $4.6 billion to $4 billion.
Former CEO Mark Hurd had been trying to make the company less dependent on printer ink for most of its profits when he was ousted in 2010 in the wake of a sexual harassment investigation.
HP had combined its PC and printers business before, under the leadership of Carly Fiorina. Hurd reversed that when he took over as CEO in 2005. Unlike today, the printer division was thriving then.
The PC division, while less profitable, has held up better. Sales are down 6.4 percent from 2008, to $39.6 billion, while operating income has been flat, at $2.4 billion.
The printing and PC units together made up about half of HP's $30 billion revenue in the first quarter, which ended in January.
Shares of Palo Alto, Calif.-based HP fell 42 cents, or 1.75 percent, to $23.56 in midday trading Wednesday.