Last week (June 14-16), HP, Inc. invited a small group of analysts to their Palo Alto Headquarters. The content was what we expected, in that they could not share all that much with us about the Samsung acquisition. With that aside, what HP did do was reinforce a message that we have been hearing for nearly a year.
That message is that this is not the same Hewlett Packard. From someone who has watched HP struggle with the Mopier and Edgeline, that message is quite true. It is one thing to hear that from the personnel charged with building a distribution network, but quite another to hear from more senior executives.
Our visit began with a tour of “the garage” where William Hewlett and David Packard built their first product in 1938—an audio oscillator. The Disney organization, which was in the process of making the classic animated film, Fantasia, ordered eight audio oscillators. Hewlett and Packard realized they could not produce the quantities required out of their garage, and the rest, as they say, is history.
Next stop was the HP campus for a full day of presentations, followed by a Q&A session with HP executives. The first speaker was Enrique Lores, president of HP’s Printing and Solutions business. In the world of HP printing, Lores is the main man. This is no small enterprise that he oversees, accounting for $20 billion, or one-third of HP, Inc’s revenue.
He began by explaining that HP was in the same business as before while emphasizing we are very different. Lores believes HP’s strength is helping corporations communicate with their customers “in a different way” as he put it.
HP’s mission is simple, and that is it needs to capture pages not printed on HP devices. On the consumer side, Lores noted, “We are not selling supplies but memories.” Since HP’s consumer business is not relevant to our industry, we’ll not delve into the “memories” that HP is selling to consumers, but will instead focus on a segment more relevant to our readers—the office space.
The office space is where HP aims to take the forefront by highlighting the security features of its printers and by demonstrating the risks posed to businesses by unsecure printers. A new series of videos entitled The Wolf illustrate common security risks. HP will be producing additional Wolf videos focusing on other market segments.
Cyber security is a serious issue as we’ve seen of late through highly publicized security breaches. HP’s response to these threats is that its printers provide control, detection, persistence, and recovery.
Tuan Tran, general manager & global head of Office Printing Solutions reinforced the security message set forth by Lores by stating that only 18% of businesses believe they have had a security problem. However, some 76% say they need to upgrade their office technology. No wonder Tran is bullish about the opportunities for HP in the A3 market, which he described as a $55 billion opportunity.
We also learned that HP is experiencing 6% year-over-year growth with a marketing strategy that is exploiting the market shift from transactional to contractual printing. Tran also believes that there are significant growth opportunities being generated by offices under contract, which he optimistically sees reaching 75% by 2020.
While we had the opportunity to hear from numerous speakers during our visit to HP, I focused on the two I believe are most important to our dealer audience—the president and individual in charge of delivering the office printing solutions to market. HP continues to be consistent in its messaging and that’s something we appreciate. However, what was most important was the 75-minute Q&A following the presentations. Tran continued to emphasize during the Q&A that the product launch was going very well with a “full funnel” of products into the market.
We shared our thoughts about HP’s foray into the channel with Tran, noting that HP was going to hit a wall in terms of signing up dealers in about six months. We noted that HP will do well with their A4 products, but we’re not so sure about A3. The reason we believe that is that HP is not used to working with dealers who carry multiple A3 lines. However, the ones they are have signed so far are some of the very best. That we know for a fact.
I further emphasized that the dealers they have signed have strong tenured reps that have been selling A3 products from at least two of the major A3 providers. Those salespeople wait each month for the list of machines in their territory coming off lease. If that same sales rep has been selling those customers Ricoh machines, for example, the opportunity of switching that same customer to HP is slim and none. Therein lies the challenge. Dealers recognize that compensation will have to be adjusted and a discussion between the channel and HP may be necessary on how to move products in that environment.
We genuinely appreciated the opportunity to have this discussion with the leaders of HP, Inc. Ultimately, we believe the company will be far more successful than they were in the past with the Mopier and Edgeline. HP has very little margin for error after those two attempts to penetrate the independent dealer channel and they know it.
HP has a clearly defined mission and a strategy, at least in the first phase of dealer recruitment, which is working quite well. Let’s see what happens when they hit that wall.
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