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H-P Unites Units

Hewlett-Packard puts its printing management in charge of PC performance.

Updated from 1:33 p.m. EST Hewlett-Packard (HPQ) shook up its internal structure Friday by placing its personal computer systems group under the management and oversight of its dominant imaging and printing unit.

Duane Zitzner, 57, head of the personal systems group, announced his retirment, and Vyomesh Joshi, 50, executive vice president of the imaging and printing unit, will lead the combined division.

H-P said the combination of its two consumer units will help it "accelerate profitable growth, leverage the power of its portfolio and strengthen its market position."

H-P shares were essentially unchanged on the announcement, down 6 cents to $19.89.

"I think it makes sense given that companies in the consumer space are defined by how lean and mean they are," said tech consultant and analyst Rob Enderle, principal of the Enderle Group. "By taking executive leadership that has shown they can compete and by putting them in charge of the PC division, there's a belief that they can apply their magic there."

The imaging and printing unit accounted for $24.2 billion of H-P's sales in 2004, or 30% of its total revenue. In profit, however, the unit earned $3.85 billion, or 73% of H-P's total earnings. The group sells printers, imaging, projectors and digital cameras.

The personal systems group logged similar sales of $24.6 billion but it only posted a profit of $210 million, 3.9% of the company's overall earnings. The group sells desktop and notebook PCs, handheld products, personal storage appliances and workstations.

The combined unit will account for around 60% of its total sales base. H-P's other main unit is the technology products group, which holds the software, services, and enterprise storage and server segments. It posted earnings of $1.29 billion on sales of $29.9 billion in 2004.

Dan Olds with Gabriel Consulting Group expects to see more bundling and co-marketing of the two group's products and noted that this could be the start of more management culling from the computer unit.

"You will look at how far you can go to gain market share profitably and once you have achieved much of that then you start looking at cutting costs," he said.

To judge the combination's success or failure, Olds said to watch how the PC unit does in terms of units and revenues vs.



during the course of the next year. "That's the benchmark H-P is looking at," Olds said.