Coming out of HP’s whirlwind day of announcements, earnings reports, and strategic restructurings, I have to admit I’m a little spent.
I haven’t seen a company this big and prominent do such an abrupt about-face in a long, long time. In fact, maybe never. It shouldn’t be a huge surprise given the trouble they had selling the TouchPad, but webOS was such a linchpin of the company’s overarching strategy; it was the virtual glue that tied together phones, PCs, tablets, printers. It really makes you wonder whether HP’s senior leadership ever really believed its own story about developing its own self-supporting ecosystem, vis-a-vis Apple. It almost sounds as if they were dishing out the Kool-Aid but secretly drinking iced tea…
Meanwhile, Bloomberg today came out with a report that HP’s PSG unit could be sold off to other big IT firms such as Lenovo or Samsung. This got me thinking. Why would anyone want to plunk down upwards of $12 billion dollars on a business that earns just a couple billion dollars a year on about $40 billion in revenues?
There may be many answers to this question, but there is at least one asset that, by itself, may be worth more than $12 billion and it’s not webOS. I’m talking about HP’s channel. The company’s go-to-market assets are literally the envy of the IT world. They are the conduit through which HP has amassed the world’s largest share of PCs, Notebooks, Workstations, and… let’s not forget: Printers.
Last March at the company’s Analyst Summit, executives shared that HP has more than 187,000 channel partners worldwide and sells its products at more than 150,000 retail locations spanning 170 countries. I’m willing to bet that if another player, say Samsung, wanted to build a comparable go-to-market infrastructure, it would probably cost more than $12 billion, and it would not happen overnight. This is precisely why HP’s decision to spin off PSG will have a ripple effect throughout the IT industry – and in particular, it may threaten HP’s dominant position in the workgroup printer market.
Imagine what a company like Samsung could do if it had a channel equivalent to HP’s? While not every VAR would immediately add the Samsung printer line just because it previously carried HP PCs or Notebooks, it would certainly open the door for Samsung to quickly grow its partner base and amplify its presence in the laser printer and laser MFP space, not to mention its other IT product lines. And since one of Samsung’s main value propositions is its promise to channel partners not to compete against them by selling direct, channel partners might be easily wooed to take on more of Samsung’s products.
Why then couldn’t Samsung effectively supplant HP as the “IT Umbrella Brand” of choice? If not supplant, then it would definitely make that market more competitive. It remains to be seen just how competitive this space may become. Much will depend on how HP decides to structure the PSG spin off, and we may not know that for sure for another 12 to 18 months. Until then, hold on to your hats – the ride ahead is about to get bumpy!
