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HP favoring PC business spin off over sale

post #1 of 29
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Hewlett-Packard revealed on Monday that the preferred strategic option for its struggling PC business is to spin it off into a separate company.

The world's largest PC maker made a surprise announcement earlier in August that it was considering "a range of options" for its PC unit, including a spin-off or sale. The company has been criticized for announcing its intentions without any clear plan of action.

But, a company spokeswoman on Monday gave a stronger indication of HP's next steps for its Personal Systems Group (PSG), Reuters reports.

"We prefer a spin-off as a separate company and the working hypotheses is that a spin-off will be in the best interests of HP's shareholders, customers and employees," she said. "However, we have to complete the diligence process and validate this assumption, including fully understanding the dis-synergies in separating the PSG business from HP."

HP said a final decision is expected by the end of the year. The full process of a spin-off or sale could take 12 to 18 months. The company is undergoing a radical transition, having axed development on webOS devices. It has also announced a more than $10 billion deal to buy Autonomy Corporation, a move that CEO Léo Apotheker says will help establish HP as a software and services giant similar to IBM.



Though HP leads the PC market in terms of volume, it has struggled to maintain healthy operating margins, which currently stand at just 5.7 percent, for the unit. Rival Apple is said to make more profit from selling one Mac than HP does with seven PCs.

According to one study, Apple has taken the top spot in the global market for mobile PCs, which include notebooks and tablets. The iPad maker holds a 21.1 percent share, compared to HP's 15 percent.

However, HP may see its mobile PC share rise after a $99 fire sale on the discontinued TouchPad allowed it to sell off its overstock, which reportedly numbered in the hundreds of thousands. After selling as little as 10 percent of their stock, retailers were said to have complained to HP about excess TouchPad inventory. The company has revealed that it has taken a $100 million charge because of poor sell through of the TouchPad, as well as a $1 billion write-off on its webOS hardware business.



Shares of the company rose $1.30 to $26.12, up 5.24 percent on Monday. The day after HP's announcement on Aug. 18, its stock plummeted 20 percent, recovering slightly since then.
post #2 of 29
The first brilliant decision following the wise decision to cancel their tablet run. Spinning off the PC Business into a subsidiary should have happened a decade prior.
post #3 of 29
omg...hp sold hundreds of thousands of hp touchpads. No offense, but thats not even impressive on a $499 tablet not to mention a $99 one. Either way, it hasnt been the most successful company in the previous weeks... losing about $100 on each of those touchpads...
post #4 of 29
Essentially, HP would be undoing the Compaq merger. It was always a stupid idea to merge HP and Compaq because HP always had a high quality, high price, high margin, moderate volume corporate culture while Compaq always had a moderate quality, moderate price, low margin, high volume corporate culture. It was doomed to be the mother of all corporate culture clashes from the beginning.

I suggest HP call the spin-off Compaq. I expect HP still have all the rights to the name.
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post #5 of 29
A spinoff wins over a sale?!

I predict the death of the spinoff within 3 years.
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post #6 of 29
"...dis-synergies"

Yep. That's why those spokespersons are paid the moderately big bucks.
post #7 of 29
Quote:
Originally Posted by mcarling View Post

Essentially, HP would be undoing the Compaq merger. It was always a stupid idea to merge HP and Compaq because HP always had a high quality, high price, high margin, moderate volume corporate culture while Compaq always had a moderate quality, moderate price, low margin, high volume corporate culture. It was doomed to be the mother of all corporate culture clashes from the beginning.

I suggest HP call the spin-off Compaq. I expect HP still have all the rights to the name.

I agree. The merger was stupid. The loss of DEC to the world was stupid. The demise of SGI was another blunder of blunders.
post #8 of 29
Taking a year to "maybe" do a spinoff is going to be painful for the HP PC company. Who will want to buy an HP PC over the next year with so much uncertainty surrounding the future of the company? This is almost as bad as Nokia announcing that they intend to kill Symbian, but waiting a year to introduce the replacement. Nobody wants to buy into a dead-end product.

Dell must be loving this.
post #9 of 29
Quote:
Originally Posted by Blastdoor View Post

Taking a year to "maybe" do a spinoff is going to be painful for the HP PC company. Who will want to buy an HP PC over the next year with so much uncertainty surrounding the future of the company? This is almost as bad as Nokia announcing that they intend to kill Symbian, but waiting a year to introduce the replacement. Nobody wants to buy into a dead-end product.

Dell must be loving this.

Dell should go on a crazy spree of introducing better products and market the crap out of them. They can become a monopoly pc maker pretty soon if the kill off acer.
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post #10 of 29
Quote:
Originally Posted by AppleInsider View Post

Rival Apple is said to make more profit from selling one Mac than HP does with seven PCs.

Proof that Apple charges too much and HP is altruistic¡
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post #11 of 29
Meh, still can't make up their mind -- announcing we're exploring, until the end of the year to decide. Well, okay at least this one they're seeing things.
post #12 of 29
Talk about a clear vision! I'm sure glad I don't hold HP stock.
Been using Apple since Apple ][ - Long on AAPL so biased
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post #13 of 29
Quote:
Originally Posted by Blastdoor View Post

Taking a year to "maybe" do a spinoff is going to be painful for the HP PC company. Who will want to buy an HP PC over the next year with so much uncertainty surrounding the future of the company? This is almost as bad as Nokia announcing that they intend to kill Symbian, but waiting a year to introduce the replacement. Nobody wants to buy into a dead-end product.

Dell must be loving this.

They might love it but I bet they wish they had an answer to the iPad even more. .
Been using Apple since Apple ][ - Long on AAPL so biased
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Been using Apple since Apple ][ - Long on AAPL so biased
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post #14 of 29
Quote:
Originally Posted by island hermit View Post

A spinoff wins over a sale?!

I predict the death of the spinoff within 3 years.

At least it should allow them to forge manufacturing or other partnerships, or sell the business if it makes sense.

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post #15 of 29
I dont understand why they'd spin off to a seperate company. HP has many customers and is a trusted namebrand. Its like if apple made a brand called [I]crap[I]. Just because its from apple doestn mean that its customers who bought the apple products originally will buy the crap products.

I think hp would be better off just changing theyre brands motto and creating quality computers. This will only hurt them.
post #16 of 29
The CEO announces a spin-off/sale without an assessment of what the 'dis-synergies' (sic) are!? That does not signal confidence or clarity in the strategy.

As to its being a spin-off rather than a sale, once spun off, it could be easily subject to a takeover if someone really wanted it. So it could simply end up being an intermediary step to an ultimate 'sale' anyway.
post #17 of 29
It will not make any difference whether HP decides to spin off or sell. The problems are much more fundamental.

HP is the largest PC seller on the planet and it still can't make any money out of it. What is wrong?

Last time I looked HP sold about 15 different PCs, not including CPU speed options etc. These are uniquely different desktops.

Most are crippled, too little memory, missing features (wireless, bluetooth etc) most have really poor quality mouse and keyboard. HP has decided to race to the bottom with their product. Additionally the pedigree of HP was cast aside. HP was renowned for the quality and reliability of their product and people were prepared to pay for that quality.

Now, HP just builds normal plain boring PC based on commodity, cases, power supplies, motherboards, keyboards, mice etc while it carries a massive corporate overhead. No wonder HP can't make any money.

Compare the product Apple produces to what HP produces.

Apple sells 2 kinds of desktop, large screen and very large screen. That's it. A few options about CPU speed and memory, disk etc, but there are really only two major products.

Now take a look at the quality of the Apple product and the HP product.
Apple uses the best monitors available, the keyboards are fantastic, the mice/trackpads and unique, the desktop is complete with every option you could think of: I don't need to buy speakers, camera, bluetooth, wireless. And the "killer app" that is so under rated is Time Machine - the best, safest and easiest to use backup software available.

Now look at the price of an Apple desktop compared to a HP desktop. Roughly, an Apple desktop will cost 40% more than a HP desktop. And we are prepared to pay for the quality and the feature rich product.

Until HP understands what it is doing wrong, they have no chance of making their PC business successful. Spin off or sale is just an admission that they have no idea what they are doing. Next it will be the server business.
post #18 of 29
Quote:
Originally Posted by bolts25 View Post

it will not make any difference whether hp decides to spin off or sell. The problems are much more fundamental.

Hp is the largest pc seller on the planet and it still can't make any money out of it. What is wrong?

Last time i looked hp sold about 15 different pcs, not including cpu speed options etc. These are uniquely different desktops.

Most are crippled, too little memory, missing features (wireless, bluetooth etc) most have really poor quality mouse and keyboard. Hp has decided to race to the bottom with their product. Additionally the pedigree of hp was cast aside. Hp was renowned for the quality and reliability of their product and people were prepared to pay for that quality.

Now, hp just builds normal plain boring pc based on commodity, cases, power supplies, motherboards, keyboards, mice etc while it carries a massive corporate overhead. No wonder hp can't make any money.

Compare the product apple produces to what hp produces.

Apple sells 2 kinds of desktop, large screen and very large screen. That's it. A few options about cpu speed and memory, disk etc, but there are really only two major products.

Now take a look at the quality of the apple product and the hp product.
Apple uses the best monitors available, the keyboards are fantastic, the mice/trackpads and unique, the desktop is complete with every option you could think of: I don't need to buy speakers, camera, bluetooth, wireless. And the "killer app" that is so under rated is time machine - the best, safest and easiest to use backup software available.

Now look at the price of an apple desktop compared to a hp desktop. Roughly, an apple desktop will cost 40% more than a hp desktop. And we are prepared to pay for the quality and the feature rich product.

Until hp understands what it is doing wrong, they have no chance of making their pc business successful. Spin off or sale is just an admission that they have no idea what they are doing. Next it will be the server business.

Printer ink!!!!

Corner the market on ink!!!
post #19 of 29
Or just "make it up" (as in "made-up" or "make-believe")

So the old axiom about make it up in volume isn't working out so well it seems.
post #20 of 29
Quote:
Originally Posted by solipsism View Post

Proof that Apple charges too much and HP is altruistic¡

I know! If Apple lowered their prices a bit they could generate market share a lot quicker. They're doing great now - imagine if they cut prices 5% or 10%?
post #21 of 29
Quote:
Originally Posted by Freshmaker View Post

I know! If Apple lowered their prices a bit they could generate market share a lot quicker. They're doing great now - imagine if they cut prices 5% or 10%?

You have a fair bit to learn about punctuation. Apple's prices don't need to be any lower at all.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

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Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

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post #22 of 29
I'm still not clear what exactly a spun off company is in relation to the spinner. Does it retain the HP moniker or change it? Does HP maintain any kind of legal or financial stake in the spun off company? Is the spin off a subsidiary? Any MBAs out there who can enlighten me?
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post #23 of 29
Quote:
Originally Posted by pooman625 View Post

omg...hp sold hundreds of thousands of hp touchpads. No offense, but thats not even impressive on a $499 tablet not to mention a $99 one. Either way, it hasnt been the most successful company in the previous weeks... losing about $100 on each of those touchpads...

I just learned something new today. I have two orders for Touchpads and HP has been driving me crazy. They make it nearly impossible to get information on the status (the online status checker never changes, I was on hold for over 2 hours before I gave up, and the online chat people don't know anything and refuse to put you in touch with anyone who does - except the 800 number where the wait time exceeds 2 hours.

In any event, I finally got through to someone and got new information. They said that my order is in the system and will definitely ship, but that it will be about 4 weeks before they get any more stock from their supplier. So, apparently, they're still making them (if they were just shipping existing inventory, it wouldn't take 4 weeks). That is really bizarre. Why cut the price so low that their order fulfillment systems were brought to their knees - and then continue to make the product to fulfill those orders? Yet it's finite - they have a cutoff of 4 am on Aug 22. If you ordered after that date, they will cancel the order. So instead of making more, why not set the cutoff date earlier?

It doesn't make any sense to me.

Quote:
Originally Posted by Robin Huber View Post

I'm still not clear what exactly a spun off company is in relation to the spinner. Does it retain the HP moniker or change it? Does HP maintain any kind of legal or financial stake in the spun off company? Is the spin off a subsidiary? Any MBAs out there who can enlighten me?

They can do whatever they want with the name. They can continue to use the HP name or they can come up with a new name.

The spun off company is a completely independent company and works just like any other independent company. Initially, HP (parent) would own 100%, but they could sell, trade, or give away any portion that they wish. Some companies are spun off and retained indefinitely by the parent, others are spun off to prepare them for a sale and some are spun off and only part of the stock is sold.

Quote:
Originally Posted by Freshmaker View Post

I know! If Apple lowered their prices a bit they could generate market share a lot quicker. They're doing great now - imagine if they cut prices 5% or 10%?

They already have something like 95% market share and they're selling iPads every bit as fast as they can make them. How do you expect a 5 or 10% price cut to do more than cut Apple's revenues by 5 or 10% (and profits by a much higher percentage)?
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post #24 of 29
Quote:
Originally Posted by jragosta View Post

I just learned something new today. I have two orders for Touchpads and HP has been driving me crazy. They make it nearly impossible to get information on the status (the online status checker never changes, I was on hold for over 2 hours before I gave up, and the online chat people don't know anything and refuse to put you in touch with anyone who does - except the 800 number where the wait time exceeds 2 hours.

In any event, I finally got through to someone and got new information. They said that my order is in the system and will definitely ship, but that it will be about 4 weeks before they get any more stock from their supplier. So, apparently, they're still making them (if they were just shipping existing inventory, it wouldn't take 4 weeks). That is really bizarre. Why cut the price so low that their order fulfillment systems were brought to their knees - and then continue to make the product to fulfill those orders? Yet it's finite - they have a cutoff of 4 am on Aug 22. If you ordered after that date, they will cancel the order. So instead of making more, why not set the cutoff date earlier?

It doesn't make any sense to me.

Sounds like they already committed to parts and production of x-many units. They might even have additional charges from their hired factories if they don't utilize (read: dispose of) all the components they've received.
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post #25 of 29
Quote:
Originally Posted by solipsism View Post

Sounds like they already committed to parts and production of x-many units. They might even have additional charges from their hired factories if they don't utilize (read: dispose of) all the components they've received.

That may be the case - but if Best Buy alone had 230,000 unsold units, all unsold units were sold, and they have more at the factory to be produced, just how many TouchPads did they think they'd actually sell? Based on the above numbers, they must have planned on well in excess of a million.
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post #26 of 29
Quote:
Originally Posted by jragosta View Post

That may be the case - but if Best Buy alone had 230,000 unsold units, all unsold units were sold, and they have more at the factory to be produced, just how many TouchPads did they think they'd actually sell? Based on the above numbers, they must have planned on well in excess of a million.

That would not surprise me in the least if that had been their initial expectation. Remember, they planned to introduce the product in multiple markets globally.

I'm surprised they didn't expect greater numbers than they did, and a bit saddened by it too, as I would love to lay my hands on one of these fire sale units ;-)
post #27 of 29
Quote:
Originally Posted by Tallest Skil View Post

You have a fair bit to learn about punctuation. Apple's prices don't need to be any lower at all.

Punctuation? What are you talking about? And I was referring to the Apple's prices on iMacs, not iPads.
post #28 of 29
At this point who really cares?

HP, if you're going to do something, just f'ing do it already, stop talking about it, and put out some products that aren't completely pointless and/or ill-conceived.

Jeezus.
post #29 of 29
Quote:
Originally Posted by Freshmaker View Post

Punctuation? What are you talking about?

Solipsism's post, which you misconstrued.

Quote:
And I was referring to the Apple's prices on iMacs, not iPads.

I made absolutely no differentiation as to on what Apple products' prices there should be action taken (to clarify again, none of them), so I have no idea where this is coming from.

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

Reply

Originally Posted by Slurpy

There's just a TINY chance that Apple will also be able to figure out payments. Oh wait, they did already… …and you’re already fucked.

 

Reply
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