Giorgio Nebuloni, Research Manager, Datacenters, at IDC EMEA, Chrystelle Labesque, Research Manager, Personal Computing, at IDC EMEA
1) Why is HP doing this?
Giorgio Nebuloni, Research Manager, Datacenters, at IDC EMEA
"HP's stated goal is to have an increased focus, faster decision-making process, and ultimately different long-term strategies and investment roadmaps for the two business blocks. Tellingly, HP Inc. (PC and printer) is depicted as a stable business with predictable returns and an organic growth pace, while Hewlett-Packard Enterprise will see 'targeted merger and acquisition activity.' In other words, the enterprise side, which is the one HP aligns most to IDC's 3rd Platform vision, is the one where IDC expects to see more radical changes and bets on in the future. Overall, and despite the trends over the past nine months, we believe the underlying assumption is that HP Inc. is poised to face headwinds in the longer term, while the enterprise part can be boosted by significant growth with the correct investments."
2) What does this mean for EMEA customers?
Chrystelle Labesque, Research Manager, Personal Computing, at IDC EMEA
HP Corp. as a whole is currently the largest IT supplier in the EMEA region, with revenue of $41 billion in the latest four fiscal quarters (FY4Q13–3Q14) on a total market opportunity of approximately $455 billion (excluding phones, telecom services, and application software), according to recent IDC data. HP is currently number 1 in hardcopy printers (18% revenue share in CY2Q14), servers (36% revenue share), and PCs (22% revenue share) and number 2 in several other categories such as networking hardware and external storage.
"Looking at the size of HP, we believe that the immediate impact of the announcement from a business strategy perspective in the region and in the countries in EMEA will be limited, as the different HP divisions already operate on compartmentalized paths both regionally and in the country. HP didn't clarify this, but in the mid term it would be expected that logistically the two companies will have to be hosted in different office facilities, with separate back-end IT systems etc. Such practical steps do take time and can distract staff from day-to-day duties."
3) What are the pros and cons of the move?
Giorgio Nebuloni, Research Manager, Datacenters, at IDC EMEA
"Opportunities are mostly strategic, long term, and include a potentially swifter culture change toward software and services on the enterprise side, without being bound to the volume/product mentality of the broader HP corporation, and realizing the growth potential in specific enterprise elements for Wall Street to see — improving stock performance for the enterprise part and potentially providing a deeper money pool for investments and acquisitions. Both companies remain huge at $57 billion annual run rates each, but 'mergers of equals' or divestitures will become slightly easier to digest. Challenges to the transition will be mostly tactical, mid term (6–18 months), and concentrated in the channel, volume, and SMB space. HP will have extra work to do to align its massive customer base between client/printing devices and low-end server and storage to keep a coherent approach on discounting and pricing, especially for SMB customers."
4) What is going to happen in the channel?
Chrystelle Labesque, Research Manager, Personal Computing, at IDC EMEA
"As happened in 2011, IDC expects competitors such as Lenovo and Dell to try and leverage this and to try to lure smaller resellers and distributors away with a 'unity' message. On the positive side, HP is in a much better organizational and financial shape these days and has a clearer story for the market. In the two-tier EMEA channel, which the company dominates, having two HPs could go either way: each supplier might weigh less and be less dominant, or it could get more room to focus and grow. In the mid term, we maintain that the split could end up being costly particularly to the volume side of both houses — HP is clearly looking at the longer-term horizon, but a strong acceleration in the value-add segments or in brand new markets (e.g., 3D printing, Big Data analytics, etc.) will be needed to prove the move worthwhile."
