After Hp’s former CEO, Leo Apotheker announced in August that the world’s largest PC maker was spinning off its PC division; the company has made an astounding about face in the wake of huge disquiet from investors. In one of the first major moves made by newly appointed CEO Meg Whitman, HP has abandoned its plans to sell off the company’s personal computer unit.
Brian Marshall, an analyst at ISI Group in San Francisco said:
HP
“HP has been a comedy of errors,” he said. “Selling a third of their revenue was probably not sound so this is obviously a pretty big reversal of the strategy that Apotheker put into place."
Trevor Evans, HP UK and Ireland Channel Sales Director for PSG (Personal Systems Group) added: “It would be naive to say the initial decision to sell didn't have an impact," he commented. "The announcement in August was an important one and had people talking about things that were not overly favourable to HP."
A review by HP of its PC business showed it was deeply integrated with other “key operations” within the company. HP also found that the cost of spinning off this section of the company would outweigh “any benefits of separation”. The review also found that as the largest PC seller in the market, this division was too valuable to its brand, procurement power, and customer relationships.
Another change announced by HP was that Whitman will share management with Chairman Ray Lane. He will look after software and technology services while she will take charge of computer hardware and corporate functions.
The original decision by Apotheker wiped nearly 20% off its market capitalization at the time. Whitman’s aim it appears is to step up growth and avoid the management mistakes that upset shareholders and led the company to cut sales forecasts three times under her predecessor.
Another important economic factor is that holding on to PCs affords the company purchasing advantages, giving it the clout to negotiate better prices for chips and hard drives, both of which are used in PCs and servers. And with memory chips prices so volatile, Whitman seems to understand the global game somewhat better than Apotheker.
We might even see the re-emergence of HP’s TouchPad tablet computer again.
