HP Goes Zero Percent on IT Financing

Monday Feb 1st 2010 by David Needle
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Program targets SMBs with IT products and services with lease-to-buy option.

Taking a page from popular promotions in the automotive industry, HP's financing group said it's now offering zero-percent financing for small to medium-sized businesses, aiming to make it easier for them to build out new IT projects even as technology budgets remain tight.

The HP (NYSE: HPQ) program provides promotional deals on financing for up to three years, covering the purchase or leasing of HP equipment including PCs, servers, networking equipment and printers.

The move continues a trend among the big IT companies, including IBM (NYSE: IBM) and others, who are looking to extend their reach beyond the enterprise to the SMB market. It's an especially aggressive move for HP's Financial Services subsidiary, itself a huge business with more than $9 billion in portfolio assets and $2.7 billion in annual revenue.

The new program gives businesses the choice to either lease or buy products. A 12-month lease program comes with a $1 purchase option while there is also a 36-month lease with a "fair market value" purchase option from HP's portfolio.

In the U.S., the program covers financing of between $1,500 to $150,000 worth of HP products. A similar deal is being offered to Canadian businesses with financing available in the range of CDN$5,000 to CDN$150,000.

"Leasing helps business customers keep their technology up to date and make the most of their IT budgets," Tom Adams, vice president and managing director of HP Financial Services (HPFS) for the Americas, said in a statement.

Research firm IDC said HP's program could be of significant benefit to many firms looking to upgrade or expand their IT infrastructure.

"Although economic recovery seems to be on the horizon, SMBs in particular are stymied because of lack of available capital. IDC has witnessed an increase in leasing activity because it provides an important, alternative source of capital to acquire new equipment," IT analysts Joseph C. Pucciarelli and Jennifer Koppy said in a research note issued today.

The IDC report also noted other vendors, such as Cisco (NASDAQ: CSCO) and IBM (NYSE: IBM), similarly offer promotional financing to SMBs. Unlike Cisco Capital's program, IDC said HPFS extends its coverage to non-HP equipment, though the latter is leased or financed at regular rates and expires in April.

The analysts also think HPFS will have to educate and motivate channel partners on the benefits of promoting the new program.

"The messaging of zero-percent financing, however, is one that is easily understood by IT organizations: HPFS is providing a no-interest loan for up to three years," IDC said. "In many situations where IT projects show a return on investment within 12 to 18 months, this financial incentive will be the tipping point in the decision of when to begin a project or upgrade. HPFS is essentially improving the timing of the project payoff and the loan payoff timing, and this is always messaging to which C-level professionals are receptive."

IDC forecasts that worldwide IT spending will grow by more than 3.0 percent in 2010, a rise it said is "a welcome increase from 2009's disappointing results."

David Needle is the West Coast bureau chief at InternetNews.com, the news service of Internet.com, the network for technology professionals.

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