Memo From HP to Wall Street: We’re Rebuilding Our Channel

One the one hand, it’s not surprising that HP is busy trying to rebuild its channel partner engagements. But on the other hand, an SEC filing published today reveals just how serious Hewlett-Packard (HPQ) CEO Meg Whitman and her team are about re-engaging VARs, IT services providers and other partners. Here’s why.

Within HP’s 10-K filing dated Dec. 30, 2013, the company states:

We entered fiscal 2013 having experienced a multi-quarter decline in revenue and operating margins. That decline in financial performance reflected a series of challenges that were facing our business. Some of those challenges related to structural and execution issues, such as aligning costs to our revenue trajectory, addressing the need to rationalize our R&D investments and reinvest in IT systems, and rebuilding our channel partner relationships. Other challenges related to dynamic market trends, such as the growth of mobility, the increasing demand for hyperscale computing infrastructure, the shift to software-as-a-service (“SaaS”), the transition towards cloud computing, and aggressive pricing conditions. We also confronted a series of significant macroeconomic challenges in fiscal 2013, such as a shift in consumer spending, weak demand in the SMB and enterprise sectors in Europe, and declining growth in some emerging markets.

Re-read that paragraph and HP clearly starts the company is busy “rebuilding our channel partner relationships.”

HP Channel Missteps and Fixes

So what went wrong in 2011 and 2012? The VAR Guy’s loyal readers already know the painful bullet-point answers. HP stumbled because the company:

• had a direct sales force that sometimes took customer engagements direct — snatching potential engagements away from partners. HP Senior VP Sue Barsamian and other channel leaders have since worked overtime to elimiate those conflicts.
• considered selling off its PC business under former CEO Leo Apotheker. Current CEO Meg Whitman vowed loyalty to PC partners to repair the damage.
• Killed its WebOS and TouchPad businesses only weeks after the products were officially launched. HP now promotes Windows 8, Android and Chrome OS mobile devices. An HP smartphone strategy also is coming into focus.
• changed its HP public cloud leadership and also overpaid for Autonomy. Whitman has since written down Autonomy’s value and somewhat stabilized HP’s cloud effort — though it’s difficult to say if HP’s public cloud can ever gain ground on Windows Azure, Amazon Web Services and IBM’s recently acquired SoftLayer business.

Signs of Progress

Still, the HP channel improvements don’t end there. In the SEC filing, HP goes on to say:

During fiscal 2013, we continued to address these challenges by driving innovation across the company, improving operations, aligning our cost structure and rebuilding our balance sheet. As a result of these efforts, revenue declines have begun to moderate as we reap the early benefits of our investments in product innovation, as decreasing costs driven by our restructuring efforts have begun to align to our revenue trajectory, as our enterprise services business has begun to become more predictable, and as our business performance has begun to improve in our printing business due to our focus on key initiatives such as Ink in the Office, Managed Print Services and Ink Advantage. In addition, we made investments targeted at our channel partner relationships through improvements in sales force and channel partner deal pricing tools and reporting infrastructure. Our strong cash flows from operations in fiscal 2013 also have allowed us to further reduce our debt.

HP Global Partner Summit 2014

So far, so good. But there’s more work to be done. HP Global Partner Summit 2014 is set for March in Las Vegas. Then again, so is Cisco Partner Summit 2014. Perhaps The VAR Guy can grab both Meg Whitman and Cisco CEO John Chambers for dinner that week.

Chambers has always been a channel-loyal guy. Now Whitman is striving to prove that HP can offer that same level of channel loyalty.