HP Shuffles its Enterprise Business Unit

May 2, 2003

Michael Singer

Hewlett-Packard Friday said it has shuffled both staff and operations within its Enterprise Systems Group (ESG) to streamline its processes.

The company said it is consolidating its Business Critical Systems, Industry Standard Servers and Network Storage Solutions divisions into one global business unit. The new umbrella group will now be called now called Enterprise Storage and Servers (ESS) and operate under the supervision of Senior Vice President Scott Stallard.

Mary McDowell, who currently leads Industry Standard Servers, has chosen to take a short sabbatical and plans to return to a senior vice president position.

The Palo Alto, Calif.-based computer and printer maker said no jobs or product lines would be impacted by the reorganization.

HP Executive Vice President Peter Blackmore called the new group is "a core piece" to building HP's corporate customer and services businesses making up a $16 billion slice of the company's overall $75 billion pie.

"Consolidating our hardware groups was always part of the plan," Blackmore told "We weren't sure when it would happen because our integration roadmap only spanned 12 months. We were expecting it sometime in 2004. The good news is that we brought it forward to now. HP's enterprise business is significantly stronger than one year ago. Our services group was successful partnering with Proctor & Gamble as well as Ericsson. I don't think HP could have pulled that off three years ago."

The company said it has also created a Business Management and Operations group, with Howard Elias appointed as senior vice president. Elias will now be responsible for managing strategy, planning and business operations for ESG. Elias is currently responsible for HP's Network Storage Solutions.

To aid with its worldwide strategy, HP said it has formed a Global Accounts role. Led by current senior vice president of HP Services and Sales, Airton Gimenes. The division is responsible for working with the regions to establish a strategy and support for global accounts. Gimenes is expected to take a couple of years to mold the company's corporate accounts vision using HP's two business units as leverage.

The company said no changes are in store for its Software Global Business Unit, run by Senior Vice President Nora Denzel, or the regional sales leadership teams in the Americas, Europe, the Middle East and Africa, Asia-Pacific or Japan.

Published reports say the consolidation of the business units also had to do with a redundancy of staff between HP and Compaq. Job titles between the two companies did not always match up. A director at Compaq might be considered a vice president at HP, for example.

Numbers Game
The Enterprise Business group's shuffle may also be part of a sales decline in its server and storage business.

During its 2003 first quarter, HP said its enterprise systems reported an operating loss of $83 million, which is not as great as a $129 million operating loss reported in the company's 2002 fourth quarter.

However, the division's sales dipped slightly on a quarter-over-quarter basis to $2.96 billion from $3.07 billion.

Blackmore said the losses have diminished over the last three years.

The reorganization also comes at a time when HP's claims of sales leadership are coming into question.

Analyst groups IDC and Gartner claim HP took liberties with their UNIX server sales numbers, according to a story filed this week by Investor's Business Daily.

Reports from both analysts firms say Sun Microsystems (Quote, Company Info) continues to be the No. 1 leader in the UNIX market.

Blackmore said HP stands by its claims and that the company did not misinterpret any of the reports.


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