HP favoring PC business spin off over sale
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.
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.
Comments
I suggest HP call the spin-off Compaq. I expect HP still have all the rights to the name.
I predict the death of the spinoff within 3 years.
Yep. That's why those spokespersons are paid the moderately big bucks.
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.
Dell must be loving this.
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.
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¡
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. .
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.
I think hp would be better off just changing theyre brands motto and creating quality computers. This will only hurt them.
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.
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.
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!!!
So the old axiom about make it up in volume isn't working out so well it seems.
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%?
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.