October 28, 2011
Whitman Says No To Ditching HP’s PC Business
Hewlett-Packard on Thursday said it is abandoning plans to ditch its PC business after reviewing a proposal from former CEO Leo Apotheker -- a proposal that could have cost the company billions of dollars in expenses and lost revenue.
The move to not spin off its PC business comes thanks to HP´s new CEO Meg Whitman, who vowed to keep the business intact and to keep selling personal computers. Whitman, the former chief executive of eBay, took over at HP after Apotheker was forced out for his poor business tactics.
“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG (the Personal Systems Group),” said Whitman.
“It´s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees,” Whitman said. “HP is committed to PSG, and together we are stronger.”
“First and foremost, H.P. is a hardware company,” Whitman told the New York Times in an interview. “We want to build out our software, but I don´t think we are done yet on hardware. There is a lot of opportunity.”
PSG was responsible for nearly a third of HP´s $126 billion in revenue in the last fiscal year, bringing in more than $40 billion in revenue and $2 billion in operating profit.
In the third quarter of 2011, HP held the top spot in PC unit shipments with 17.7 percent. China´s Lenovo was second with 13.5 percent and Dell was third with 11.6 percent, according to research firm Gartner.
Whitman will also have to decide on the future of WebOS software. Apotheker put that division in jeopardy after he rubbed out the WebOS-operated TouchPad tablet due to poor sales.
Whitman said the company would make a decision on the future of WebOS within the next two months. “We need to be in the tablet business “¦ and we´re certainly going to be there with Windows 8,” she added.
HP acquired WebOS last year when it purchased smartphone company Palm.
Todd Bradley, the head of the PSG, did not say whether HP would re-enter the tablet market with webOS. The company currently sells a tablet that uses Microsoft software. He said the “effective price” for the tablet is $300, adding that “the challenge is building that out.”
HP has advantages within reach and enough manpower to compete. “It´s not about software, it´s about solving customer problems,” he said. “No one can compete with us in so many countries, with as big a sales force.”
Whitman said the decision to retain the PC group was essential. Separating the PC unit would have cost HP $1.5 billion in one-time expenses and another $1 billion annually, she noted.
“This is the most pragmatic decision and allows them to continue to leverage the end-to-end supply chain benefits,” Gartner analyst Mark Fabi told Poornima Gupta of Reuters, adding that it also showed Whitman's decisiveness as CEO.
“Clearly this was missing over the past year,” he added.
“Hopefully this is a beginning of a set of events over the next year that demonstrates the board has a better grip on things,” Forrester analyst Frank Gillett told Gupta. “It didn´t feel well thought out or well executed in August.”
HP shares were up 0.59 percent at $27.15 in after-hours trading after gaining 4.82 percent on Wall Street on Thursday.
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