Cisco has put the boot into rival HP, claiming the potential sale of its PC business could severely weaken its operational leverage and hit the channel in the pocket.
In an internal memo, leaked to ChannelWeb sister title CRN US, Cisco explains that spinning off the unit that delivers more than a third of sales would seriously hurt HP's purchasing power. The memo also outlines how a sale would affect HP's ability to achieve economies of scale and damage its supply chain relationships.
"Without PCs leading the sale, we expect HP's average channel facetime to decrease by approximately 50 per cent, average transaction size to decline by 35 per cent and channel funding to decline," adds Cisco.
The rest of HP's portfolio will also feel the pinch as lucrative cross-sell opportunities are passed up, claims the memo. It adds that HP's attempts to establish itself as a big player in the networking arena will also be undermined as the hardware giant sacrifices the ability to compete aggressively on price.
In the commodity infrastructure market, a PC-less HP will find it hard to win out against cheaper alternatives such as Dell and the Asian vendors, believes Cisco, while in the high-end space it will struggle to match the R&D investments of players such as EMC. When it comes to the software, business applications and services arena, Cisco suggests HP will invariably lose out to the market's established alpha males, including IBM, SAP and Oracle.
The memo states: "While spinning off the PC business creates a number of challenges for HP, they are unlikely to reverse the decision, as the PC market is forecast to decline and face margin pressure due to the rise of tablets and increased commoditisation."
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