By BARBARA ORTUTAY, Associated Press
NEW YORK (AP) — Hewlett-Packard Co. is combining its printer and PC divisions as it tries to overcome dragging profits, growing competition and the lack of clear identity.
The move announced Wednesday will help the company streamline its business and save money to invest in growing areas. HP, a Silicon Valley pioneer, is hoping a renewed focus on innovation will re-establish the 73-year-old company as a technology trailblazer
"We have got to place a few bets where we can fundamentally change the name of the game," HP CEO Meg Whitman told shareholders Wednesday at the company's annual meeting in Santa Clara, Calif. The Associated Press monitored a webcast of the meeting.
Whitman said printing remains one of the areas where HP can still make its mark. First, though, she said the company needs to trim its expenses, describing the combination of the PC and printing division as a "perfect example" of her streamlining plans.
"We are going to have to save to get growth going again at HP," Whitman told shareholders.
Wednesday's restructuring is one of the first major steps that Whitman, formerly eBay Inc.'s chief, has taken since she took the top job at HP in September. Her predecessor, Leo Apotheker, had wanted to sell or spin off the PC business, a plan that contributed to his ouster after 11 months on the job. Under Whitman, HP decided to keep the unit after all.
The change comes as sales of printers and ink, once HP's lifeblood, are falling because people are sharing more documents and photos online instead of printing them.
HP, the world's No. 1 maker of personal computers, is also coping with declining PC sales as consumers in the U.S. and Western Europe delay replacing their machines and spend money instead on smartphones and tablet computers such as Apple's iPad.
Whitman inherited a faltering company that's facing growing competition from mobile devices and internal operational challenges such as a complex supply chain, which HP hopes to simplify by combining the divisions. While HP's revenue has been falling, the company's expenses have been rising — an imbalance that Whitman is scrambling to fix.
Echoing remarks that she made to analysts last month, Whitman told shareholders Wednesday that it may take several years to clean up the mess.
Investors already have been growing impatient as HP has been eclipsed by neighboring tech companies such as Apple Inc., whose founder, Steve Jobs, briefly worked at HP in the 1970s
One investor who addressed Whitman expressed his frustration over the divergent fortunes of Apple and HP. Apple's market value has soared by more than $500 billion during the past decade while HP's has climbed by about $10 billion.
Besides combining the PC and printing units, Whitman is unifying HPs marketing functions under one executive and consolidating other areas of its business. She told shareholders that the company can reduce its roughly $4 billion marketing budget without hurting the HP brand.
Whitman hopes to reduce the internal complexity that she believes is making the company slow to adapt to customer demands and changing technology. On Wednesday, the company stressed that the changes will mean a more streamlined, faster and consumer-focused Hewlett-Packard, one that fits its mantra, "One HP."
The company expects to increase productivity and efficiency in PCs and printing, while streamlining customer support and the company's supply chain.
Shaw Wu, senior technology analyst at Sterne Agee, said he believes there's room to cut expenses, particularly in administration and marketing.
But he warned that savings may be limited. Customers don't necessarily want to buy computers and printers at the same time. People replace PCs much quicker than printers, which can last five years or longer.
HP didn't say how much it will save or what effect the restructuring would have on jobs, but the move is likely to result in layoffs. In a 2009 shake-up of the printing, PC and other divisions, HP cut 4,400 jobs. The company had 349,600 workers as of October, the end of its most recent fiscal year.