Milunovich, a Merrill Lynch global technology strategist, said yesterday HP could improve its strategic focus by creating different organizations. The units could separately focus on consumers, with printing and imaging, and corporate customers.
Speaking ahead of HP’s securities analyst meeting in San Jose, California, Milunovich said splitting HP would benefit shareholders. As much as the company would argue that its divisions are separately run and optimized, we don’t fully believe it, Milunovich said.
Imaging and printing represents a healthy, and high-profile, business for HP. The company closed its fourth quarter last October with 56% market share in the Inkjet market while imaging and printing represented 16% of HP’s total $19.bn revenue, with an operating profit surpassing $1bn for the first time.
On systems, though, HP faces competition from both Dell Corp’s direct selling model in PCs and low-end servers and storage, and IBM Corp’s vast customer base and systems and services orientation.
HP has conceded it expects to see pressure on profits, but chief executive Carly Fiorina has insisted HP would continue to provide the high-tech, low-cost, best customer experience to see off competition from Dell and IBM.
Milunovich said HP’s best course of action is to become the IBM alternative in enterprise computing, since competing with Dell at the low end appears futile. To take such a course of action, though, requires greater focus, and – while efficiencies can be gained in distributing both computers and printers – imaging and printing would benefit from independence, according to Milunovich.
Merrill’s analyst suggested HP’s diverse line of hardware, that includes Compaq, Digital and Tandem systems, could be re-branded with imaging and printing retaining the HP name.
An HP spokesperson said in response to Milunovich: We believe the portfolio we have built is compelling and provides the core for solid growth and profitability.
This is the second time within the last 12 months Milunovich has advised a major Silicon Valley systems company to radically overhaul its business. In October, Milunovich sent an open letter to Sun Microsystems Inc chief executive Scott McNealy recommending Sun concentrate on scalable, high-end Solaris systems, dropping the Java Desktop System (JDS) and either spinning-out or open sourcing Java.
