HP combines printer, PC units

Hewlett-Packard is putting its printers and its PCs all in one basket.

The computing giant on Friday said it has merged its Imaging and Printing Group and Personal Systems Group, forming the HP Imaging and Personal Systems Group. The revamped unit will be led by Vyomesh Joshi, 50, who has been executive vice president of the imaging and printing unit for the past three years and has worked at HP for 24 years.

Vyomesh Joshi

HP says that combining the groups internally will foster greater efficiency and help the company to bring products out more quickly. It did not immediately offer details on related costs, potential cost savings or staffing. It will continue to report financials for the two groups separately.

The two groups have already been collaborating extensively on projects such as HP's consumer electronics effort, the company said. HP's consumer electronics line combines products from both groups, including PCs designed for the living room, televisions, digital cameras, printers and music players, including HP's version of the Apple Computer iPod.

At least one analyst was initially skeptical about the benefits of putting printers and cameras under the same boss as desktops, notebooks, workstations and handhelds.

"I doubt this will help HP with its PC performance," said Wendy Abramowitz, an analyst at Argus Research. "It may be the main thing here is that it suggests the PC business is not turning the kind of profits they were hoping for."

Abramowitz pointed out that HP made a similar move a year ago, combining its services business with enterprise systems. "In both cases, all it seemed to do was to get rid of certain personnel," she said.

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Although HP's PC group has attained profitability, the PC business as a whole is only expected to get tougher over the next few years. Market researcher Gartner, for one, has predicted that after a relatively good year in 2005, the PC market will see slower growth between 2006 and 2008. That will put pressure on PC makers, undoubtedly forcing name-brand companies to scale back their efforts or exit the business altogether, Gartner predicts.

For HP, combining the printing and PC groups may be one way to weather the coming storm. Others are already getting out of the business. IBM, the third largest PC manufacturer after Dell and HP, has announced a plan to sell its PC unit to Lenovo Group. Although IBM will maintain a stake in Lenovo, the deal removes Big Blue from the day-to-day business of building PCs.

Friday's move to merge two units wasn't the only option HP has considered. In recent years, the board of directors on three occasions has also looked into splitting up the company, HP CEO Carly Fiorina said in early December. The measure, which would have amounted to spinning off the PC business, was defeated each time, as the board stuck with the belief that HP's business benefits from a tight bundling of products, she said.

Abramowitz said that HP's decision to team its high-achieving printer division with one of its weaker units was not likely spurred by rival Dell's recent entry into the printer market, nor IBM's plans to exit the PC business.

Nonetheless, after word broke of the IBM-Lenovo deal, a number of Wall Street analysts reiterated their stance that HP should either sell its PC business or spin off its highly lucrative printing business, with its current investors getting a piece of the action in the printing company.

Duane Zitzner

HP is banking that Joshi's success with the imaging and printing unit will translate into good news for the combined group.

"There is no person better suited to lead this new organization than Vyomesh Joshi. Under his leadership, the Imaging and Printing Group has grown to be a highly profitable $24 billion business that leads the market in virtually every category in which it competes," Fiorina said in a statement. "Applying this leadership to the newly combined organization allows us to achieve an even higher level of performance."

Duane Zitzner, executive vice president of the Personal Systems Group, has retired. The 57-year-old, whom Fiorina credited with stabilizing the PC business and returning it to profitability and growth, will work with Joshi for a time to ensure a smooth transition, HP said.

CNET News.com's Dawn Kawamoto contributed to this report.