HP to Merge Printing, Personal Systems Groups

UPDATED: HP will bundle its printer and personal computing group to streamline operations.

UPDATED: HP said it is combining its Imaging and Printing Group and Personal Systems Group in order to trim costs and accelerate growth.

The company, which has steadily reorganized its business since acquiring Compaq in 2003, also said that the new Imaging and Personal Systems Group (IPSG) will be led by Vyomesh Joshi.

Joshi has served for three years as executive vice president of the Imaging and Printing Group. CEO Carly Fiorina, in a statement, said the group is a "highly profitable $24 billion business that leads the market in virtually every category in which it competes."

Duane Zitzner, executive vice president of the Personal Systems Group, has retired from HP but will work with Joshi to provide a smooth transition, the company said.

HP said it will not change the way it reports earnings. But the reorganization means HP's printer, imaging and supplies, projectors and digital cameras will be sold under the same banner as the company's PCs, handheld devices, workstations and personal storage appliances.

Uniting the divisions shouldn't be much of a stretch because the Imaging and Printing Group and the Personal Systems Group already collaborate. The groups fueled the company's grand Big Bang 2 launch in August 2003, trotting out 158 new printers, cameras, PCs, scanners and handhelds in New York.

Merrill Lynch analyst Steven Milunovich outlined the pros and cons of the change in a research note Friday, noting that Joshi is a highly regarded manager who may be able to improve the PC business.

He also said synergies in marketing and distribution might be improved, and the company may recognize some cost savings from sharing overhead functions. Also, the ability to bundle printer and imaging solutions with consumer devices could benefit from the change.

On the downside, uniting the two groups could make it more difficult to spin out the printer division, even though HP said the move does not signal preparation for a breakup of the company. Milunovich also pointed to the idea that a "bad" business -- in this case PCs -- could bring down a "good" business like the printers.

"Overall, we think the move is a slight positive, given the possibility of improved management of PCs, both tactically and strategically," Milunovich said in a research note. "HP's shares appear inexpensive, though we remain neutral given structural concerns and lack of confidence in execution."

HP's stock price was largely unaffected by the news, and shares were trading at $19.90 by mid-afternoon, compared to a Thursday closing price of $19.95.

Reshuffling and change is nothing new to HP.

In May 2003, the company overhauled its Enterprise Systems Group "to accelerate long-term growth and streamline operations."

One year later, the company merged its software, hardware and services into one entity, now called the Technology Solutions Group.

Other changes are afoot as well. Last month, the company vowed to stop designing Itanium, giving sole development authority to long-time partner Intel.

Next Tuesday, the company is expected to make key announcements regarding its servers, promising to "drive business agility into the 21st century."

The company could benefit from such an event to erase memories of its dismal third quarter last summer, when its business critical server revenue dropped 8 percent and storage revenue plummeted 15 percent.






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