HP calls a mulligan, decides to keep its PC division
It looks like Hewlett-Packard is going to stay in the PC game after all. The company announced in a this week that it would be keeping its PC division, reversing an August announcement in which it said it was planning to go all in on services and business support.
Why the sudden about-face? To put it in perspective, let鈥檚 briefly revisit that initial August decision. The announcement that the company would try to spin off its PC division, including smart phones and tablets, was made just before then-CEO Leo Apotheker鈥檚 departure and the arrival of new chief Meg Whitman. The announcement, which also killed off the development of the company鈥檚 webOS hardware, stemmed from HP鈥檚 struggles in the hardware industry, especially as its smartphones and (now-discontinued) Touchpad tablet struggled to gain traction.
At the time, the decision made a lot of sense: hardware manufacture wasn鈥檛 very profitable for HP, and popular tablets such as Apple鈥檚 iPad didn鈥檛 just take away from Touchpad sales 鈥� they also lured away potential laptop and desktop customers. But the PC unit was still very closely intertwined with HP鈥檚 overall structure, so Apotheker (in one of his last decisions as CEO) ordered a close review of the proposed spinoff.
Now, two months later, that review has concluded that separating the businesses would cost HP about $1.5 billion in costs such as building new IT systems, creating new sales and support networks, and meeting other startup costs. And HP would lose the scale of its supply chain, which could hurt its other units. Basically, the PC division is just too closely intertwined with HP to make a spinoff viable.
What鈥檚 the company鈥檚 next step, now that it鈥檚 decided to maintain its PC division? PCs are still a pretty low-margin business, and HP will have to find ways to design and build units more efficiently as well as assuring customers that it鈥檚 not going to walk out from them (again). It also faces stiff competition from Dell and Lenovo, both of which profited when customers hesitated to pick up HP machines in the wake of the latter鈥檚 August announcement.
HP will also have to think about its plans for making smartphones and tablets, now that the Touchpad has been spiked. Whitman confirmed today that the company will indeed get into the tablet market again. But webOS鈥檚 precarious position as a mobile operating system could make that tricky. HP might decide to focus more resources on webOS development. Alternatively, as Larry Dignan over at ZDNet, HP might partner with Google to make an Android tablet, or with Microsoft to make a Windows 8 tablet.
Whatever happens, current owners of HP machines can breathe a little easier 鈥� the company has made it clear that it鈥檚 committed to staying in the PC business. Readers, what do you think of this announcement? And what do you think of HP鈥檚 machines? Let us know in the comments.
