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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.
Dell, Lenovo Take Aim as HP Begins to Split in Two
In addition, in a video on the company’s Website, Michael Dell—without naming HP—stressed the stability and vision of the now-private vendor, which is pushing to become an IT solutions and services provider.
“In light of recent news and uncertainty, I want our customers and partners to know that Dell has never been more certain,” the CEO says. “Our business from end to end is strong and gaining momentum. Today, Dell is the fastest growing integrated IT company in the world. … The best way for Dell to enable our customers’ success was to be a comprehensive provider of future-ready technologies, from the desktop to the data center to the cloud, and that’s exactly what we’ve done.”
Michael Dell said the company has its “best-ever portfolio of hardware, software, solutions and services, all engineered to work together as open, scalable, end-to-end solutions. We are fully committed to all of our businesses, now and for the long term. … As a private company, we’re more stable, more driven and more liberated to lead in a fast-changing industry and an uncertain world.”
In response, HP officials said in a statement that “the only thing resonating with Dell’s strategy is a lack of enthusiasm. Based on the conversations we’ve had, our customers and partners understand our strategy and they are as excited as we are for how two laser-focused Fortune 50 companies and help drive their businesses.”
In their own statement, Lenovo officials said they would have no specific comment on HP’s decision, but noted their company’s continued strength in the global PC market and the capabilities Lenovo will be adding not only in servers with IBM’s x86 system business in hand but also its $2.9 billion acquisition of Motorola Mobility from Google.
“We are confident this trend [with PCs] will continue, as we are focused and will continue to leverage the consolidation of this industry to grow; as we are innovative and the market can expect we will launch more and more exciting PC, mobile, enterprise and ecosystem products in the near future and in the long term; and as we are consistent and clear with our strategy, which after we close both the IBM System x and Motorola deals, will give us three growth engines—PC , Mobile and Enterprise,” they wrote.
Both are going in the opposite direction of HP, choosing instead to broaden their capabilities rather than narrow them. Pund-IT’s King said he didn’t think HP’s decision to split the company signaled that the push by some vendors—including Dell and Cisco Systems—to become comprehensive IT solutions providers had failed.
“Dell is doing a terrific job of building its end-to-end strategy, and Lenovo will do a good job now that it has [IBM’s] System x [business],” he said.
It could be an indication of the difficulty of managing a company the size of HP, King said. Dell and Lenovo may be pushing to greatly extend the reach of their businesses, but they’re not the size of HP. At the same time, for public companies to thrive in these “earning-obsessed” days, they either need to be dominant in their markets—like Apple—or be a PR darling like Facebook, he said.
For old-line tech vendors like HP, it’s a hostile environment.