HP's merging of PC, printer divisions a prelude to layoffs

CEO Meg Whitman promises move will improve company's 'operational efficiency'

Wall Street on Wednesday was underwhelmed by Hewlett-Packard's decision to merge its PC and printing units to create what the company is pretending it believes will be an innovation-driving juggernaut. In reality what HP is doing is consolidating two divisions competing in struggling markets in order to cut costs. Layoffs are around the corner, folks. Shares of HP (NYSE: HPQ) fell more than 2% Wednesday morning to 23.36 from Tuesday's closing price of 23.98. The company's stock is drifting toward the seven-year low of 21.50 set last September after former CEO Leo Apotheker announced plans to spin off the Personal Systems Group (HP's PC division) of the world's largest PC manufacturer. That strategic 180 cost Apotheker his job. His successor, former eBay chief executive Meg Whitman, reversed Apotheker's decision to dump PCs, but has faced a conundrum: PSG's revenue and operating margins are shrinking and aren't going to improve -- the reality driving Apotheker's reasoning -- yet PCs still account for nearly 30% of HP's revenue and are important to HP's sales channel. Whitman obviously is more persuaded by the latter fact, and by merging PSG with HP's Imaging and Printing Group -- another incredibly shrinking profit center -- she's basically signaling that the company plans to ride the weakening PC wave all the way to bitter, dribbly end. Though she doesn't put it quite that way in Wednesday's statement:

“This combination will bring together two businesses where HP has established global leadership,” said Whitman. “By providing the best in customer-focused innovation and operational efficiency, we believe we will create a winning scenario for customers, partners and shareholders.”

In case you weren't aware, "operational efficiencies" is corporate-speak for cutting the payroll. The combined entity, called the Printing and Personal Systems Group, will be headed by PSG executive vice president Todd Bradley. Vyomesh Joshi, EVP of the printing division, is retiring. HP also announced some other moves certain to presage layoffs: * The Global Accounts Sales organization will join the newly named HP Enterprise Group. * HP's marketing functions will be "unified" across business units under the current chief marketing officer. * Same goes for HP's communications employees. * HP's Global Real Estate function is moving from Finance into Global Technology and Business Processes "to address real estate consolidation and improve the workplace experience for HP employees." For the ones that aren't laid off, that is.

Chris Nerney writes ITworld's Tech Business Today blog. Follow Chris on Twitter at @ChrisNerney. For the latest IT news, analysis and how-tos, follow ITworld on Twitter, Facebook, and Google+.

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