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HP to Keep 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 […]

Written By: Jessica Davis

Oct 28, 2011

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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.”

HP to Keep PC Division

Jessica Davis

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