HP puts onus on partners to improve capital return

Hewlett Packard has urged channel partners to raise their return on capital employed (ROCE) to match those achieved in the pharmaceutical and other industries, following its own lacklustre performance over the past three quarters.

The vendor has revealed that it wants distributors and resellers to reduce their cost structures and the amount of capital tied up in their inventory, after dire conditions in the global PC market forced HP to dictate to the channel that it must achieve 40 per cent ROCE.

HP cited increasing scarcity and rising costs of finance as the driver for such a move.

In the first quarter ended 31 January, net profits were a meagre two per cent up on the previous quarter, the second period revealed a 13 per cent decline; in the third quarter, profits to 31 July were up one per cent.

CHS Electronics and Actebis have been appointed as part of a pan-European pilot scheme to examine ways of raising ROCE. Quadram in Holland and Italy's Delta have also been signed at a local level.

Tino Canegrati, personal computer and wholesale sales manager for HP's commercial channels organisation, EMEA, said the vendor was not responsible for inefficiencies within the channel and partners should cut their own costs.

Peter Rigby, director of marketing and communications at CHS, said one way to raise ROCE would be to bring down lead times between shipments: 'We have good inventory levels with HP, but a lot of capital is tied up in stock. Lower lead times would release the capital.'