HP to Keep PC DivisionBy Jessica Davis | Print
Industry observers applauded HP's decision to keep its PC division, the Personal Systems Group (PSG) after all. HP's new CEO Meg Whitman announced the decision Oct. 27, ending more than two months of anxiety by partners, customers, employees and shareholders over the fate of HP's very successful PC division.
HP will keep its PC business after all, the company announced Thursday, putting an end to the uncertainty that had flummoxed channel partners and stunned industry observers ever since HP’s then CEO Leo Apotheker said in August that he was considering a spinoff of the Personal Systems Group (PSG).
"HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees," said Meg Whitman, HP’s new president and CEO, in a statement. "HP is committed to PSG, and together we are stronger."
HP said that the strategic review involved subject matter experts from across the businesses and functions. The data-driven evaluation revealed the depth of the integration that has occurred across key operations such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP’s solutions portfolio and overall brand value. Finally, it also showed that the cost to recreate these in a standalone company outweighed any benefits of separation.
Analysts applauded the decision.
"We believe HP made the right financial decision in keeping its PC business, and agree that a spin-out of the business would have resulted in material negative synergies," said Senior Analyst Toni Sacconaghi of Bernstein Research. "We maintain that HP’s prior decision to explore strategic options for the PC business was made hastily, with limited research and consultation among HP executives, and was made in part as an attempt to mollify investors aghast at the Autonomy acquisition announcement."
"Beyond the reasons cited, supply chain and sales synergy and expense of spinning out, it's also crucial for HP to remain in the market for personal devices, which is entering a period of radical transformation and opportunity," Forrester analyst Frank Gillett wrote in his blog. The innovations spawned first by RIM with the Blackberry, followed by the transformative effects of Apple's iPhone and iPad are beginning to ripple into the PC market.
HP said in a statement announcing the decision: "PSG is a key component of HP’s strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers. The HP board of directors is confident that PSG can drive profitable growth as part of the larger entity and accelerate solutions from other parts of HP’s business."
HP is the market share leader in personal computers with revenues totaling $40.7 billion for 2010 in that area.
"As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry’s broadest portfolio of PCs, workstations and more," said Todd Bradley, executive vice president, Personal Systems Group, HP, in a statement. "We intend to make the leading PC business in the world even better."