by Steven Burke on October 12, 2017, 10:40 pm EDT
HP CEO Dion Weisler Thursday reaffirmed his commitment to driving sales through partners singling out the "trust" solution providers have in HP in an intensely competitive "omnichannel" market.
With HP driving 87 percent of its $51 billion in annual sales through the channel, Weisler said the company's partners are at the center of a critical shift from transactional to contractual recurring revenue selling models like device as-a-service.
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"By the way they trust us," Weisler told analysts after the company issued fiscal 2018 earnings guidance at the high-end of Wall Street expectations. "They don't always trust other people."
Weisler's comments came just several weeks after rival Lenovo slashed back-end payments, spiffs and program discounts in a series of moves that partners say will ultimately result in solution providers shifting some business to HP and Dell.
Lenovo is eliminating the "cost-minus" pricing structure that allowed distributors to offer discounts to partners while still maintaining gross margin, sources said. Solution providers expect the changes to cut their Lenovo profit margins, in some cases by as much 30 percent to 50 percent.
In response to a question on rival channel changes, Weisler (pictured) said there is "change all around us – a lot of it driven by omnichannel and its implications" on how customers consume PC and printing offerings in the future.
"In much the same way that our big industries – the Personal Systems and the Print industries – are consolidating, there is consolidation going on even at the distribution level with some of our partners and at the reseller level," he said.
"The channel remains the most efficient route to market possible, in my view," Weisler continued. "We do 87 percent with or through the channel because they are an amplification of our sales force and they are able to reach many more people in a more efficient way than we would be able to do and add incremental value to our base platform."
Weisler said the strategies employed by rivals change quarter to quarter and region to region. "We have our different competitors deploying different strategies; some are very consistent, some seem to move around a lot," he said. "What we need to do is keep our finger on the pulse and ensure that we are playing our own game – not playing anybody else's game."
Weisler said it is critical that HP remain laser focused on where the markets are going, differentiate with significant innovation and then work with "channel partners to layer value for our customers and then deal with our competitors in a very aggressive and responsible way where we take profitable share."
Weisler said he expects continued shifts by competitors in the fast moving PC and printer markets. "I don't expect, and it has never been static over the 30 years I have been doing this," he said. "Different players do different things from time to time, and we just need to adapt."
The printing model channel shift to reduce inventory and drive more ink supplies subscription revenue has been a major benefit for partners, said Weisler.
HP Imaging and Printing President Enrique Lores said the sales shift has led to "price stabilization" that has driven a stronger business model for partners.
As for Personal Systems, HP Personal Systems President Ron Coughlin said his businesses double-digit sales growth combined with a mix shift to premium is leading to off-the-charts growth for partners. "Nobody else in the industry is near that type of growth rate with the channel," he said.
As for the HP device as a service advantage, Coughlin noted, that HP is the only one of the PC makers that has the experience moving to an as a service model with managed print services. "We are the only company that has experience doing this because we did it six years ago with channel MPS (managed print services)," he said. "We know how to enable the channel which is very, very difficult."
HP CFO Cathie Lesjak told analysts that the company expects GAAP diluted net earnings per share for fiscal 2018, which ends Oct. 31, 2018, of $1.74 to $1.84 with free cash flow of $3.0 billion. The Wall Street consensus was $1.68 to $1.86, according to Thomson Reuters.
HP shares were up $0.50 (2%) to $20.90 in after-hours, a new 52-week high. HP shares are up 35 percent so far in 2017, following a 30 percent increase during 2016.
Two years after the company's split from Hewlett Packard Enterprise, Weisler said he is "thrilled about the reinvention and how it is making its way into" the company's financial results.