H-P's PC & Printer Under One Roof - Analyst Blog


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In an attempt to restructure its business model, reduce cost and improve efficiency; Hewlett-Packard Company ( HPQ ) has decided to merge its Personal Computer and Printing divisions into one business unit.

This is a huge strategic move taken by Meg Whitman after she took over as the CEO of the company. This restructuring might result in some layoffs, which is a cause for concern for some of its employees.

Personal computers and printing business are complementary in nature. They have similar set of customers and are challenged by the popularity of cloud computing and tablets such as Apple's ( AAPL ) iPad. 

This merger is expected to enhance the storage facility and documents and photos' display. Given their complementary nature, HP intends to offer PC and printer as a package to the end users, thereby resulting in better pricing.

The new unit will be headed by PC division chief Todd Bradley. However, Vyomesh I. Joshi, who had been the head of printing division for past 31 years, is retiring. Mr. Joshi had played a pivotal role in the development of HP and expanded the company's business in areas like industrial printing.

Though this strategy is implemented with the view that one might influence the sales of another, there is a flipside to it: customers don't necessarily want to buy computers and printers simultaneously. Generally people change PCs frequently, while printers have a life of 5 years or more.

Moreover, HP is planning to launch new tablet featuring Microsoft Corp. 's ( MSFT ) Windows 8 operating system. The company is hoping high to capture a significant share in the tablet market.

Apart from implementing internal restructuring process, HP is also keen on making its cloud computing services public within two months. HP's cloud services will be somewhat similar to the cloud platform offered by renowned online retailer Amazon.com Inc. 's ( AMZN ) Web Services.

HP's cloud infrastructure is popular among its customers. However, its software- as-a-service offering may take some time to ramp, as the existing customers will first use it.

The announcement to merge the two businesses into one is encouraging. However, it will take some time to implement the decision. This apart, a lackluster PC demand and a dull business prospect in Europe may pose some short-term challenges.

Currently, HP has a Zacks #3 Rank, implying a short-term Hold recommendation.

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