HP CONSIDERING COMBINING PRINTER & PC UNITS. WHY?

Justin Scheck reported on WSJ.com today that HP CEO, Mark Hurd has commissioned a plan to combine HP’s PC unit run by Todd Bradley and the Printer unit run by VJ Joshi. While the Printer business has over the past 10-15 years produced the lion’s share of the company’s profits, revenues have begun to flatten out as consumers print less. According to the WSJ.com article, in HP’s fiscal quarter ended July 31, PCs produced $8.43 billion in revenue and $386 million in earnings, or 12% of HPs total profits. Printer and ink revenue for the same period was $5.66 billion, yielding nearly a billion in profits for the quarter, 12% of HPs total. Clearly printers are still a great business for HP.

So why the reorganization? One explanation is that Hurd is continuing to put his own team together at the top. While this may well be part of the explanation, I suspect that there are strategic forces at play here as well. As the price of PCs come down, companies like HP and Dell are making a variety of moves to diversify their business portfolios. HP’s acquisition of EDS and Dell’s of Perot Systems are part of this move. HP is also active in large enterprise and production printing. This reorganization may well be about the consumer market and its close cousin, the small office, home office market. On the consumer end, however Apple has set the standard for packaging hardware with software and content (iLife, iTunes, etc). HP may be looking to combine PC and Printing strategies into a package of offerings that will enable the company to stake out territory in the consumer space as PCs morph into netbooks, handhelds and so forth.

Hardware increasingly needs to provide valuable access to content in order to be differentiated. Printing is one mode for information sharing, which is increasingly unnecessary, especially for young consumers. If printing begins to go the way of film, then the race will be on to find ways to keep users engaged with HP devices. A transition approach that more closely integrates the user experience of sending a document to a printer with sending an image to Facebook, or a video to YouTube might be a start at redefining printing as a service. If the user experience is the new competitive battleground, then hardware and software design must work together to make that experience one that is brandable and differentiated. It’s harder to pull off this integration when organizations are siloed.

I could be wrong. What do you think about this theory?