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HP Merges PC, Printer Units as Sales Slacken (Update1)

Stocks in this article: HPQ

(Story updated with additional information on HP's hardware and software businesses, restructuring and share price.)

PALO ALTO, Calif. ( TheStreet) -- Hewlett-Packard (HPQ) plans to merge its PC and printer divisions to cut costs amid falling revenue, marking the latest restructuring as hardware sales remain limp.

HP, in a statement released before market open, confirmed that its Imaging and Printing Group (IPG) and Personal Systems Group (PSG) will be merged into what's called a Printing and Personal Systems Group. The new unit will be led by HP PC chief Todd Bradley, the executive vice president of PSG since 2005.

HP CEO Meg Whitman

HP also confirmed that Vyomesh Joshi, the executive vice president of IPG, is retiring after 31 years with the company.

Rumors have been swirling that HP was planning to bring the PC and printer divisions together, further signaling CEO Meg Whitman's desire to get HP, the biggest maker of personal computers, back on track.

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

HP expects that the merger will improve the company's go-to-market strategy, branding, supply chain and customer support. The realignment will also provide opportunities for cost savings, according to HP.

The company's hardware sales, particularly in PSG, have been under pressure amid a weaking PC market. The Palo Alto, Calif.-based firm has also faced fierce competition from the likes of Apple's (AAPL) Mac products and server rivals such as IBM (IBM) and Cisco (CSCO).

Sales from HP's PSG division, for example, tumbled 15% year-over-year during the company's recent fiscal first-quarter results, while IPG revenue dipped 7%. Revenue HP's Enterprise Servers, Storage and Networking (ESSN) revenue declined 10% year-over-year.

HP is looking to ramp up its higher-margin software business in an attempt to drive profits, although software currently makes up a less than 4% of overall sales.

PSG, in contrast, accounted for just under a third of HP's revenue during its recent fiscal first quarter. IPG made up 21% of the firm's total sales, while ESSN was just under 17%.

In addition to merging its PC and printer businesses, HP made a slew of other restructuring announcements on Wednesday. The company's Global Accounts Sales organization, for example, will join the newly renamed Enterprise Group. Led by HP hardware guru David Donatelli, this includes ESSN and Technology Services.

HP also said it will unify market functions across business units under the firm's chief marketing officer, Marty Homlish. The tech bellwether, which came under fire last year for its communications, will combine its communications employees worldwide under Chief Communications Officer Henry Gomez.

The PC maker is also moving its Global Real Estate function from Finance to Global Technology and Business Processes.

Shares of HP were down 28 cents, or 1.2%, to $23.70 in recent trading.

--Written by James Rogers in New York.

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