Dell, Lenovo Take Aim as HP Begins to Split in Two

For HP's rivals, the tables have turned as the company begins a year-long process of becoming two separate businesses.

business trouble

Dell and Lenovo, which in the past had been the target of Hewlett-Packard's efforts to lure away customers during times of high-profile transitions, are taking aim at their rival in the wake of HP's Oct. 6 announcement that it was splitting into two companies.

When CEO Michael Dell announced in February 2013 that he intended to take his namesake company private, HP officials wasted little time courting Dell customers that might have been worried about the uncertainty such a move can bring.

In a statement issued soon after Michael Dell made his announcement, HP officials noted Dell's "very tough road ahead" and that the company faced "an extended period of uncertainty and transition that will not be good for its customers." There was talk of Dell's debt load, questions about the company's ability to invest in products and service and concern that "leveraged buyouts tend to leave existing customers and innovation at the curb."

"We believe Dell's customers will now be eager to explore alternatives, and HP plans to take full advantage of that opportunity," officials said in the statement.

HP officials continued to question the decision, with CEO Meg Whitman saying in August 2013 that Dell essentially was trading one headache for another by going private.

HP turned its focus to Lenovo and IBM this year, after the company announced in January it was buying IBM's x86 server business for $2.1 billion, a move that would expand its competition with HP beyond PCs—Lenovo overtook HP last year as the world's top PC vendor—into the server realm. The deal, which closed Oct. 1, made Lenovo the third-largest server maker in the world, behind HP and Dell, and Lenovo executives said the goal was to become No. 1 in that market as well.

Soon after the Lenovo-IBM deal was announced, HP officials—who said it opened up a $4 billion market opportunity—launched a program called Project Smart Choice aimed at IBM server customers that might be uncomfortable with Lenovo's plans. In July, HP ran a full-page ad in The New York Times urging IBM customers to look to HP. Antonio Neri, senior vice president and general manager of HP's servers and networking businesses, told eWEEK that the company had seen its win rate against IBM jump more than 40 percent during the six months after the Lenovo deal was announced.

Now HP has some significant disruption of its own. After three years of resisting analyst calls to shed the PC business and saying the giant tech vendor worked "better together," Whitman announced Oct. 6 that the company will split in two within the next 12 months. The PC and printers business will become HP Inc., while the business-focused units—including servers, networking, storage and cloud efforts—will become Hewlett-Packard Enterprise.

Whitman said that splitting HP in two will create two new companies that will be more nimble and more focused on their core customer needs. They'll also be in better position to make the necessary acquisitions to meet customers' demands.

And keeping those customers—not only those large enterprise businesses that spend millions of dollars on data center technologies, but also the broad range of smaller companies in the customer base—should be job one for HP going forward, according to Charles King, principal analyst with Pund-IT. HP officials will want to assure their customers of the benefits they'll get from the company splitting in two given the efforts rivals will make to lure those customers away.

"As HP tried to take advantage of the changes happening at Dell and Lenovo … those same competitors will be going at HP customers with a vengeance," King told eWEEK. "And both Dell and Lenovo have very compelling stories to tell."

Those efforts by Dell and Lenovo to foster doubts about the HP plan and to highlight what they can offer already have begun. Dell issued a statement soon after Whitman's announcement saying that "HP’s decision to break apart its business is complex, distracting and appears to benefit HP and its shareholders more than its customers, which is ultimately the wrong priority."

Editor's note: This story was updated to include a response from HP to Dell's statements.