HP merges enterprise unit with services group

Hewlett-Packard is merging its enterprise hardware and software unit with its services group to form one division called the...

Hewlett-Packard is merging its enterprise hardware and software unit with its services group to form one division called the Technology Solutions Group.

Chairman and chief executive officer Carly Fiorina said the change is intended to align HP's sales efforts into its large corporate accounts. The changes began in June and will be finalised in the middle of next year. HP will continue breaking hardware, software and services revenue out separately in its financial reports.

"We don't expect undue disruption. This has been part of the path we've been on for some time," Fiorina said.

News of the change came only a day after HP said it is merging another pair of operations, its Global Operations and Information Technology divisions. Longtime HP employee Gilles Bouchard will run the organisation and assume the title of chief information officer.

Fiorina cast that IT consolidation as a sign of the company practising what it preaches.

"We're combining our global operations and our IT functions … because we know that driving process improvements and IT together is the way to continue to make the most rapid progress," she said. "It is how we advise our customers, and it is very consistent with our Adaptive Enterprise strategy."

One HP goal has in the coming year will be to stabilise its financial performance, which Fiorina admitted was erratic in 2003. The company fell short of analyst expectations in the third quarter, a period in which its Personal Systems Group, HP's PC and consumer devices unit, slipped into the red.

HP's goal for 2004 is to keep its PC lines profitable, and boost the Personal Systems Group's fortunes by tackling new areas in the consumer digital photography and entertainment markets, with new offerings, such as a digital music player and online music store, to be introduced early next year.

Meanwhile, HP's crown jewel remains its lucrative Imaging and Printing Group. Dell is gunning for some of HP's market share there by introducing its own printers this year, but Fiorina shrugged off the threat posed by Dell.  "I think Dell is a company that is trapped in the PC business," she said.

HP still sold 400,000 printers to Dell customers in the past year through a manufacturing relationship between the two companies, despite Dell's newer partnership with Lexmark International . Fiorina predicted that partnership will be short lived, saying she sees Dell's market share gains in the sector coming at Lexmark's expense.  "I suspect that partnership is under great strain right now," she said.

Fiorina expected the IT industry to pick up next year, although many segments will remain challenging. "The economy overall is clearly improving. We see it in consumer spending. We see it both in the sentiments of our enterprise customers and in the momentum we see in that space."

Stacy Cowley writes for IDG News Service

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