HP to combine PC and printer divisions

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UPDATE: HP has confirmed in a statement that the Personal Systems Group and the Image and Print Group will be merged.

The combined entity will be led by Todd Bradley, who has served as the executive vice president of PSG since 2005, said the statement.

Vyomesh Joshi, executive vice president of IPG, will retire having spent 31 years at HP.

"VJ embodies the spirit of HP and his impact on the company has been tremendous," said Meg Whitman, president and chief executive officer, HP. "Under his leadership, IPG accelerated innovation and pioneered solutions that transformed the printing market. We wish him the very best as he embarks on a new chapter in his life."

HP is to combine its PC and printer divisions into a single business unit, a move that will see Vyomesh "VJ" Joshi, the long-time head of HP’s printer division, leave the company, according to a report.

HP plans to announce the move later today (21/03/2012), according to a story in the Wall Street Journal’s ‘All Things D’ blog, which cited unnamed sources. An HP spokesman said the company declined to comment on the report.

It would be the first sweeping change at HP since former eBay chief Meg Whitman took over as CEO last September. Whitman was brought in to right HP’s ship after the company replaced two CEOs in a little over a year and appeared to lose its direction.

HP’s Personal Systems Group (PSG), which makes its PCs and laptops, is the biggest division at the company, pulling in $8.9 billion (€6.7 billion) in revenue last quarter. The Imaging and Printing Group (IPG), traditionally one of its most profitable groups, brought in $6.3 billion (€4.75 billion). Together they account for about half of HP’s total sales.

Under the reorganisation, the IPG will be subsumed by the PSG, and the combined division will be led by Todd Bradley, the executive vice president who today runs the PSG, All Things D reported.

Joshi, who has been at HP since 1980, will leave the company, the paper said.

In Ireland, the PSG is led by Marcus McKenna, while the IPG is led by Gary Tierney.

Former CEO Leo Apotheker announced a plan last August under which HP might sell or spin off its PC division. It was a controversial move in part because of the uncertainty it created for HP customers, and Whitman was quick to announce after she came on board that HP would keep the PC group after all.

The move is part of an effort to cut costs at HP and simplify its business, a source told All Things D. The plan is to have the groups more tightly integrated, so they can more easily approach customers with combined offerings.

Combining the divisions might make sense since there’s a lot of overlap in terms of customers and how the two groups market and sell products, said NPD Group analyst Stephen Baker. "In that sense there’s probably a lot of synergy," he said.

While selling ink cartridges has been a profit driver for HP, PCs and printers are both essentially commodity hardware businesses, he said, meaning there’s overlap in how they should be managed. An exception is HP’s commercial printer business, which might not fit so comfortably in the PC division.

HP considered a similar plan several years ago, Baker said, but at that time it was the PC division that would have been subsumed into the printer group.

Nowadays, HP may see better long-term prospects for its PC division, said analyst Roger Kay at Endpoint Technologies. New form factors such as ultrabooks and tablets are keeping the PC market alive, whereas people print less documents these days and printer sales are declining.

"The growth just isn’t there, and as HP looked out in the future I think they’re not seeing it there either," Kay said.

The printer business has been a lucrative one for HP historically, and financial analysts have urged HP in the past to spin it off into a separate division. But the group’s profit margins are not as high as they once were, Baker said.

The operating margin for HP’s printer division last quarter was 12.2%, down from 17% a year earlier. Both the PC and printer divisions reported declining sales last quarter.

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