Leaked Cisco memo predicts bleak HP channel future

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Leaked Cisco memo predicts bleak HP channel future

Alex Scroxton

In an internal memo leaked to US channel press, Cisco has slammed its rival HP, saying that the possible removal of its PC business from the equation will hobble its rival's ability to compete effectively in the channel.

The crux of Cisco's attack centres on the idea that the PSG business is the base around which most HP channel sales pitches are built, and its removal will make it harder for resellers to cross-sell other parts of the HP portfolio.

Cisco claimed that the excision of PSG will mean "channel facetime" could drop by 50%, deal size by 35%, and channel funding could also decline.

The result would be that HP has difficulty reaching and serving its partners, opening the door to rivals such as Cisco.

"Under Mark Hurd, HP's success was driven by efficiencies of scale; lower expenses through supply chain efficiencies and increased volumes via cross-selling and broad market coverage," suggested Cisco.

"Without the PC business there is very little supply chain or go-to-market commonality between the remaining parts of HP," said the memo.

When it comes to Cisco's core networking business, the vendor suggested that HP Networking (HPN) had exploited HP's brand-name and commodity product pricing to beef up its networking business.

However, Cisco said, Leo Apotheker's ill-fated attempt to de-focus HP from commodity hardware sales created uncertainty for HPN resellers.

"The loss of purchasing power and the ability to price lower as part of a larger campus bundle will make it difficult for HP to continue its low-margin strategy and 'Almost Good Enough' messaging," said Cisco.

"At the same time, HP is also unlikely to transition to a value player in networking, given the significant R&D investment required. This lack of differentiation, combined with HP's weakened brand, will make it difficult for HP to compete in networking."


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