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HP must prove its stability to partners

Larry Walsh warns that HP must move to allay fears about its future at its upcoming global reseller forum in Las Vegas

Larry Walsh
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In under two weeks the HP channel will descend on Las Vegas for its annual Global Partner Conference, comprising three days of product announcements, technology briefings, and overviews of new channel initiatives.

What's not on the official agenda is how HP will finally lay to rest rumours and speculation about its future. It's an issue HP must address for partners, who are persistently asked by customers and prospects about what will come next for the IT giant, given its performance struggles.

HP got hit again with speculation about its future when reports surfaced the day after Dell's leveraged buyout; some have suggested the HP board is 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 currently set by Wall Street.

Actual details on any breakup proposition remain unclear. Some analysts believe HP is considering all options to revitalise the company amid its operational challenges, changing market dynamics and years of poor management.

Chief executive officer Meg Whitman is on record saying she believes that the company must remain whole if it is to succeed.

In recent US 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 breakup was imminent.

Soon after, Whitman dismissed such interpretations, saying HP is stronger as it is.

Some analysts speculate that Dell's 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 is seeing sales fall in nearly every major product category -- not just PCs. Additionally, HP has missed the entire tablet and smartphone revolution thus far; 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, seeking a leverage buyout and taking the company off the market. However, the market's reaction to renewed rumours of a breakup - mostly positive - suggests Dell's decision may be a wise one.

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 programme good? For the most part, HP has a mature channel programme.

Is HP investing in its future? HP says it is 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 have told us that they're seeing internal instability at HP that 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 capitalise 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 to open wounds before they've healed, or allowing others to tell its story.

At the Global Partner Conference, HP should be the one to tell its rebirth story to resellers and let them carry that into the field.

Larry Walsh is president and chief executive officer of Channelnomics

As part of our special editorial partnership, CRN is publishing this recent article from Channelnomics.

CRN special projects editor Sam Trendall will be in Las Vegas for the global HP partner conference 19-21 February -- so keep an eye on Channelweb.co.uk for the latest news.

 

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