Channelnomics

HP Must Prove Stability to Partners

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In two weeks Hewlett-Packard Co.’s channel will descent upon the Las Vegas strip for the annual Global Partner Conference for three days of product announcements, technology innovation briefings and overviews of new channel initiatives.

What’s not on the official agenda is how HP will finally lay to rest rumors and speculation about its future. It’s an issue HP must address to partners, who are persistently being asked by customers and prospects about what comes next for the IT giant given its performance and struggling recovery effort.

HP got hit again with speculation about its future when reports surfaced the day after Dell’s leveraged buyout that its board was considering breaking up the company. The underlying rationale: HP’s components – its operating divisions – are worth more to shareholders in a spinoff or sale than the $33 billion market cap current set by Wall Street.

The actual details of the latest HP breakup news remain unclear. Some analyst believe HP is considering all options to revitalize the company amid its operational challenges, changing market dynamics and years of poor management. CEO Meg Whitman is on record believing that HP’s success will requires the company staying whole.

In recent Securities and Exchange Commission filings, HP noted that it was considering selling underperforming or strategically unimportant assets as part of its recovery. The market and channel took that to mean a break up was imminent; Whitman soon after dismissed the interpretations saying HP is stronger as is.

Some analysts speculate the Dell going private is putting pressure on HP to revive shareholder value. While HP stock is trading up, its value remains one-third of its gross revenue and it’s seeing sales fall in nearly every major product category, not just PCs. Additionally, HP missed the entire tablet and smartphone revolution; while it has products coming out, most are designed for Windows 8 and Windows Phone 8, which haven’t proven significant market drivers.

Few believe HP will go the way of Dell, in seeking a leverage buyout and taking the company off the market. However, the market’s reaction to renewed rumors of a breakup – mostly positive – shows the wisdom of Dell’s decision. Rather than trying to satisfy Wall Street while rebuilding for the future, Dell chose one over the other and booted the investors out.

Are HP products competitive? Yes. Is HP’s channel program good? For the most part, HP has a mature channel program. Is HP investing in its future? HP says it’s increasing R&D spending; a new analysis says HP’s research spending is about $1 billion less than what competitors invest. Will HP eventually recover? Well, that’s debatable, and that’s what’s keeping partners and customers on edge.

HP partners tell Channelnomics that they’re seeing ample internal instability at HP, which is affecting their ability to take their products to market or coordinate activities. Simultaneously,  HP’s competitors are stepping up displacement and disruption campaigns, looking to capitalize on HP’s missteps and follies.

No one expects HP to solve all its problems overnight. In fact, the channel has waited 18 months so far, and has seen signs of improvement since Whitman took the helm. However, HP has a tendency of opening healing wounds or allowing others to tell their story. At the Global Partner Conference, HP should be the one to tell its rebirth story to solution providers and let them carry it to the field.

 

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