Thursday, March 22, 2012
HP Combines PC and Printer Businesses
HP announced yesterday that it will combine its personal computer and printer units. The firm tried this once before, under CEO Carly Fiorina. Her successor reversed course just a short time later. What are the benefits of such a move? HP believes that they can achieve substantial cost savings from such moves. Perhaps they also can coordinate their sales and distribution strategies more effectively. What are the risks? First, this move may make it more difficult/costly to divest the PC unit in the future, if the firm decides that it really can't make a go of it for the long haul in PCs. Second, investors may lose some much desired visibility into segment financial performance. If HP reports PC and printer financials combined, then printer earnings may mask weakness in the PC unit. Lack of transparency may cause investors to discount their valuation of the firm.