HP Combines Printer, PC Units - Page 2

HP and Dell Inc. have been battling for the top spot in the PC industry since the Compaq purchase. In the third quarter last year, both IDC and Gartner Inc. had Dell ranked first, with HP a close second, in a market that saw unit shipments globally rise between 9.7 and 12 percent. IDC, of Framingham, Mass., had Dell with 18.2 percent of the market and HP with 16.2 percent; Gartner, of Stamford, Conn., said Dell had 16.8 percent of the market, and HP 15 percent.

Charles King, an analyst with Pund-IT Inc., said the move will enable HP to combine the earnings of its PC business with the highly successful printing group, giving it some statistical leverage in its PC competition with Dell. Whether it will bolster the PC business remains to be seen, though it strengthens the push by HP to make itself a dominant player in the consumer-based digital media space, said King, in Hayward, Calif.

"For the past year or so, a lot of financial and industry analysts have talked about HP divesting itself of or spinning out the enterprise group," he said.

"The sticking point in that scenario is, where would the company put the printing business? It obviously has a role in both the consumer and commercial side of things. This move sees HP coming down on the side of PCs being with printers, with printers not being in the enterprise business."

Roger Kay, an analyst with IDC, said the consolidation decision seemed like it was made quickly in response to Duane Zitzners retirement. Zitzner, executive vice president of the Personal Systems Group, will stay around to help with the transition, according to HP.

"It doesnt look to me like they had done a lot of planning," Kay said. "Someone still has to run the [PC business]. They put it under VJ; its for expediency. But they still need to find someone full time to run it."

The challenge, now that the PC business has lost some stature, is finding a qualified person that would want to take it on, he said.

Kay also dismissed HPs contention that the move was made to more tightly bind the PC and printing units for business reasons.

"They dress it up as that, talking about the synergy," he said. "But you could turn that on its head. Why couldnt they do all that stuff with two divisions, having people from both divisions meet in a room?"

Editors Note: This story was updated to include comments from analysts.


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