Hewlett-Packard (HP) combined its personal-computer and printer units under Vyomesh Joshi, charging him with boosting profit at a business that failed to meet forecasts. Duane Zitzner, head of...
Hewlett-Packard (HP) combined its personal-computer and printer units under Vyomesh Joshi, charging him with boosting profit at a business that failed to meet forecasts. Duane Zitzner, head of the PC unit, left the company.
Joshi, credited with accelerating earnings at HP’s printer unit in the past three years, will assume control of a PC business where profit margins have shrunk to less than 1 percent of sales. Zitzner, 57, retired after 15 years, the company said yesterday.
Under Zitzner, the PC unit missed a goal set by Chief Executive Carly Fiorina in June 2002 to more than triple profit margins by the end of 2004. The PC business ranks second to Dell after losing the No. 1 spot in 2003. While both businesses had about $24 billion in revenue in fiscal 2004, the printer unit made $3.85 billion in profit and the PC business made $210 million.
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“HP has been challenged in the PC division and V.J. has had a string of successes,” said Chuck Jones, who helps manage $15 billion including HP shares at Stein Roe Investment Counsel in San Francisco. “He might be able to see some additional ways to leverage the PC business through the printer division.”
The printer group is HP’s most-profitable unit, with a margin of 16 percent in fiscal 2004 ended Oct. 31. Joshi had promised to deliver 13 percent. Fiorina in 2002 said profit at the PC unit could reach 4 percent of sales in 2004.
HP shares rose 12 cents to $20.07 yesterday and have dropped 19 percent in the past year.
Joshi said he’ll focus on increasing PC profits rather than taking market share from Dell. There are no plans to cut jobs at either unit, he said.
“I will do the right tradeoff in terms of market share and profit,” said Joshi, 50. “Duane did a great job with the PC business. I can take it to the next level.”
Joshi, a native of Ahmadabad, India, has been on the rise at HP since the late 1990s. In 1999, Joshi persuaded Carolyn Ticknor, who then ran the printer unit, to let him pitch to new CEO Fiorina his plan to spend $1 billion refreshing the entire consumer printer line to sell lower-priced products.
The new lineup, known in the company as the “Big Bang,” came out in June 2002 and helped boost profit margins in the printing division to 2004’s 16 percent. The margin was about 10 percent before the introduction, Joshi said last year.
“V.J. is a highly regarded manager and may be able to improve the PC business,” Merrill Lynch analyst Steven Milunovich told investors in a note yesterday. He rates the shares “neutral” and doesn’t own them.
The printer and PC units already set some product plans together, after Fiorina, 52, tapped Joshi in 2002 to develop a common consumer strategy following the purchase of Compaq Computer. The new unit will be known as the imaging and personal systems group, the company said.
Combining the PC and printer businesses should yield some cost savings from shared overhead, as well as allow Joshi to bundle PCs and printers as he sells to consumers and business customers, Milunovich said.
HP also hopes to win customers from IBM, Joshi said. IBM said last month it is selling its PC business to China’s Lenovo after failing to make a profit for three-and-a-half years.
Zitzner came to HP in 1989 from IBM, where he ran a software research lab. In 1993, he became head of a new division making server computers based on chips from Intel. He took over HP’s PC group in 1996.