It’s hard to make the move to get out of the PC business when you’re the leader in the market. At last count, HP was easily besting Dell, Lenovo, and Acer in the PC market, and to give that up now would be a mistake. PCs are a key component in what makes HP special, and what helps it sell other products. It can’t lose sight of that.
During HP’s last full year, the company was able to generate over $40 billion in revenue off its PC division. That’s a boatload of cash that would have gone away if it decided to spin off the PC business. Right now, HP needs to grow its revenue, not let it plummet.
Whether HP is in the PC business or not, the company will compete against Dell for dominance. By getting out of the PC business, HP would have given Dell the opening it’s been after for years to try and regain its position of dominance in the marketplace. By keeping the PC business in-house, HP is eliminating any chance of Dell coming in to take its PC customers.
As HP itself pointed out, spinning off its huge PC business would be too costly. Not only would the company have to establish a whole new firm, but it would have to create new contracts, set up new facilities, and engage in so many activities that the costs would have been prohibitive. Like it or not, HP needed to keep its PC business.
Strangely, Leo Apotheker believed that by spinning off HP’s PC business, his company could focus on software and solutions and become more agile. But the PC business is a driving force behind HP’s software and solutions operations. After all, companies that buy the PC want the software from the same company. It typically means better price and it provides an easier experience for the customer.
The corporate world has long viewed HP as a PC maker first. So, to ditch the PC division and try to appeal to them with software and solutions might have been a mistake. With the PC business as part of its firm, however, HP can use that to get in the door and then make the real profit on its other offerings.
Although some say that fixing HP’s PC division is a daunting task, it really isn’t. The fact is, HP has a huge base of loyal customers. What’s more, the operation is profitable, though margins are low. HP needs to find a way to be more Apple-like, deliver better-designed products, and become a standout in the space. If Apple could do it with no market share, HP should be able to pull it off with its market share.
Let’s not forget that HP wasn’t only thinking about spinning off its PC business. The company also said that it was refocusing its business, ditching the HP TouchPad, and thinking seriously about turning its back on WebOS. That’s too much change for such a big company. Incremental shifts in focus are fine, but too many changes creates an even bigger issue for large firms.
When the idea of spinning off the PC business was first floated, Leo Apotheker was sitting in the C-suite. But now that he’s gone, it’s clear that he had no idea what he was doing. Apotheker knew software, and he wanted to make HP fit into his expertise. But HP is too big for that. Apotheker had to go because he didn’t understand that.
Although part of the reason HP thought about spinning off its PC business was possibly due to considering selling it, the company can still do that if it keeps the operation in-house. In fact, if HP makes its PC business stronger by not spinning it off, it might just be able to attract buyers that would pay even more for its division. It’s something that HP likely considered before it made its decision.