Feeds

Cisco veep slags off HP's PC biz wobble

Predicts doom for rival in not-so-secret document

Combat fraud and increase customer satisfaction

Cisco quietly sat on the sidelines during the summer as a series of gaffes by a hapless senior executive team forced down HP's share price by a fifth.

But the networking kingpin has found its voice again to predict that hitting the Personal Systems Group eject button will damage HP and its partners' bottom line and lead to price increases across other parts of the company's portfolio.

In a memo to the global sales force, leaked to US trade rag CRN, Rob Lloyd, Cisco exec veep for worldwide operations, said the strategy would downgrade purchasing power in memory and processors.

"We believe that the negative supply chain implications could generate 2-5 per cent margin loss, which HP would have to absorb in the form of lower gross profits, price increases passed on to customers or lower margins for channel partners."

He estimated that in a post-PSG world, HP's share of the worldwide x86 ASICS would plummet from 20 per cent to just one per cent, putting pressure on volume servers that depend on HP's PC purchasing power and weakening the vendor's hand against Dell.

Cisco - which lest we forget is working through its own proposals to sack thousands of workers - estimates that HP's PC biz generates up to $1bn in channel funding - promos, MDF and distie co-op funds.

This cash is used to cross-sell HP kit including networking, software and other more margin rich products and the removal of PSG would have serious implications for the vendor, particularly in the SME space, said Cisco.

"We expect HP’s average channel face time [with the customer] to decrease by approximately 50%, average transaction size to decline by 35% and channel funding to decline, making it more difficult and expensive to reach and serve the channel partners," said Lloyd.

Spinning off PSG would unpick disgraced former CEO Mark Hurd's strategy of driving efficiencies of scale, crystallised by lower op-ex, ramped volumes and presence across multiple product markets.

Recently installed CEO Meg Whitman backs the strategy boiled up by predecessor Apotheker but will confirm the fate of PSG inside the next couple of months.

Cisco reckons HP is unlikely to do a U-turn and maintain the PC unit as margins continue to erode due to the burgeoning tablet market - which HP exited - and commoditisation.

Lloyd didn't stop at PSG though; he said HP "lacks scale" in software and business process services that underpinned IBM's strategy, and that buying Autonomy would not help as it was a BI platform.

"HP has 7% share in network management software, the only place in the software stack where it is a top five vendor," said Cisco.

And Lloyd couldn't wait to have a pop at the networking biz, claiming that HP used the brand, "me too" products and commodity pricing to push up sales. But getting out of commodity hardware areas like PCs raised question marks over networking, he claimed.

"The loss of purchasing power and the ability to price lower as part of a larger campus bundle will make it difficult for HP to continue its low-margin strategy and 'Almost Good Enough' messaging," said Cisco. ®

Combat fraud and increase customer satisfaction

More from The Register

next story
This time it's 'Personal': new Office 365 sub covers just two devices
Redmond also brings Office into Google's back yard
Kingston DataTraveler MicroDuo: Turn your phone into a 72GB beast
USB-usiness in the front, micro-USB party in the back
Dropbox defends fantastically badly timed Condoleezza Rice appointment
'Nothing is going to change with Dr. Rice's appointment,' file sharer promises
BOFH: Oh DO tell us what you think. *CLICK*
$%%&amp Oh dear, we've been cut *CLICK* Well hello *CLICK* You're breaking up...
AMD's 'Seattle' 64-bit ARM server chips now sampling, set to launch in late 2014
But they won't appear in SeaMicro Fabric Compute Systems anytime soon
Amazon reveals its Google-killing 'R3' server instances
A mega-memory instance that never forgets
Cisco reps flog Whiptail's Invicta arrays against EMC and Pure
Storage reseller report reveals who's selling what
prev story

Whitepapers

Securing web applications made simple and scalable
In this whitepaper learn how automated security testing can provide a simple and scalable way to protect your web applications.
3 Big data security analytics techniques
Applying these Big Data security analytics techniques can help you make your business safer by detecting attacks early, before significant damage is done.
The benefits of software based PBX
Why you should break free from your proprietary PBX and how to leverage your existing server hardware.
Top three mobile application threats
Learn about three of the top mobile application security threats facing businesses today and recommendations on how to mitigate the risk.
Combat fraud and increase customer satisfaction
Based on their experience using HP ArcSight Enterprise Security Manager for IT security operations, Finansbank moved to HP ArcSight ESM for fraud management.