HP to decide on PC spin-off plans by year end

Company is reportedly thinking about keeping the Personal Systems Group, which sells PCs and smartphones

Just over a month after Hewlett-Packard said it would sell or spin-off its PC business, new CEO Meg Whitman on Thursday said the company will decide on a proposal to spin-off the PC unit by the end of the year.

Under former CEO Leo Apotheker, HP in mid-August said it would explore the sale or spin-off of the Personal Systems Group (PSG) unit, which deals in PCs, smartphones and tablets. News agency Bloomberg earlier reported that HP was reconsidering a proposal to spin-off the PC unit, citing a source familiar with the company's plans.

Speaking on a conference call Thursday, Whitman said that a decision on the group's future would come sometime in the next three months. "With regard to the potential spin off of PSG, we're committed to doing the work right now to determine the best path forward and we expect the board to make a determination by the end of the calendar year if not sooner. This decision is solely based on the value to investors and value to customers," Whitman said.

Whitman was appointed as HP's CEO on Thursday after the company board identified weaknesses in former Apotheker's leadership and felt the need to bring in new leader, said Ray Lane, executive chairman at HP on the conference call.

With razor-thin margins and slowing sales, the PC unit has become a drag as HP moves to emphasize more profitable business areas such as enterprise software, services and hardware. HP in mid-August also said it would kill webOS smartphones and tablets, and a buying frenzy ensued after HP started selling its TouchPad tablets at US$99 to clear out inventory.

Analysts said that the PC business is an integral part of HP's operations and could remain in the company's fold.

"They are the largest PC vendor is the world, the most profitable after Apple. Talking about spinning that off without any resolution on it was a surprise," said Ezra Gottheil, senior analyst at Technology Business Research.

The plan to sell the PC business without a clear direction damaged trust with customers and partners, and may have cost Apotheker his job, Gottheil said.

"How would you as a customer have responded? I believe they are worried. They took a very large installed base and customer base and made them wonder." Gottheil said. "I don't think it ever was a good idea, and it's never going to happen."

Whitman's top priority should be to stabilize the chaos surrounding HP's direction among employees, partners and customers, Gottheil said.

Though challenged on margins, the PC business is HP's largest revenue source and is self-sustaining, said Roger Kay, president of Endpoint Technologies Associates. The PC business will help HP retain strong distribution and logistics capabilities, and be a key component in HP's printer and higher-margin enterprise hardware and consulting businesses, Kay said.

"Aside from synergies, the PC business is still a contributor to the bottom line," Kay said.

However, PSG's webOS software and hardware business could be toast after being mishandled by Apotheker, Kay said. Apotheker inherited the webOS business after HP bought Palm last year when Mark Hurd was CEO. HP killed the tablets and smartphones, but said it would retain webOS software and license it to third parties.

HP's TouchPad became hot only after it a drastic price drop to $99 from $499, so Apotheker must have prematurely dismissed the market, Kay said. Had the TouchPad sold for $299, HP would have sold a few thousand units, enough to establish a beachhead in the market, Kay said.

There is also little interest in licensing WebOS, Kay said, adding that it stands little chance against competing mobile platforms such as Apple's iOS and Google's Android. Microsoft's upcoming Windows 8 OS for tablets will make it even more challenging for WebOS to survive.

"Nobody wants to license [WebOS]. If they don't build their own hardware and can't license it, they bought Palm for nothing," Kay said.

Disagreeing with analysts, consultant Steven Protter said HP should move ahead with plans to spin-off the PC business to maintain financial integrity. Protter specializes in HP server and software integration.

"I believe that the PC business is low margin and agree with HP's decision to spin it off so long as they retain their server business," Protter said.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags tabletsbusiness issuesHewlett-Packardhardware systemslaptops

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Tom Pope

Dynabook Portégé X30L-G

Ultimately this laptop has achieved everything I would hope for in a laptop for work, while fitting that into a form factor and weight that is remarkable.

Tom Sellers

MSI P65

This smart laptop was enjoyable to use and great to work on – creating content was super simple.

Lolita Wang

MSI GT76

It really doesn’t get more “gaming laptop” than this.

Jack Jeffries

MSI GS75

As the Maserati or BMW of laptops, it would fit perfectly in the hands of a professional needing firepower under the hood, sophistication and class on the surface, and gaming prowess (sports mode if you will) in between.

Taylor Carr

MSI PS63

The MSI PS63 is an amazing laptop and I would definitely consider buying one in the future.

Christopher Low

Brother RJ-4230B

This small mobile printer is exactly what I need for invoicing and other jobs such as sending fellow tradesman details or step-by-step instructions that I can easily print off from my phone or the Web.

Featured Content

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?