Computing company HP has pulled back its plan to spin-off its PC unit, two months after announcing it would be considering a move away from the market.
The company yesterday said it has completed its evaluation of strategic alternatives for its Personal Systems Group (PSG) and has decided the unit will remain part of the company.
“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees,” said CEO and president Meg Whitman.
“HP is committed to PSG, and together we are stronger.”
This comes after the company in August said the “personal computing market is quickly evolving with new form factors and application ecosystems. Given these realities, HP believes it is in the best interests of the company and its shareholders to explore ways for PSG to position itself to address these rapid changes, and maintain its technological and market leadership positions.”
It said the exploration of alternatives for PSG will help the company accomplish its strategic goals and pursue profitable growth and enhanced shareholder value.
About turn
The company explained that the strategic review it had since undertaken involved subject matter experts from across the businesses and functions.
“The data-driven evaluation revealed the depth of the integration that has occurred across key operations, such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP's solutions portfolio and overall brand value. Finally, it also showed that the cost to recreate these in a standalone company outweighed any benefits of separation.”
It added that the board of directors is confident that PSG can drive profitable growth as part of the larger entity, and accelerate solutions from other parts of HP's business.
Crisis moment
Senior analyst of Systems and Infrastructure Solutions at IDC Hannes Fourie said HP, being number one in the PC market, means PSG is still a profitable business for the company.
“Initially, I thought they were planning to move away from the consumer side to data. The consumer IT market is huge and growing massively. So HP has recognised that. Unfortunately the competition is crazy.”
Strategy Worx MD Steven Ambrose said it was a good move to push the company into software and services, but the board and core employees felt moving away from hardware was regressive.
“So I think this is a very smart move. HP's software and hardware offerings are complementary so it makes good sense.
“In the end, their stock price will increase. They've had their moment of crisis, but now they're back on track and the company will be re-energised. I think it's an excellent move.”
Slim margins
In August, HP announced it was considering a dramatic turn away from the struggling PC business by spinning it off into a separate company, and bought British software maker Autonomy for $11.7 billion, focusing on faster-growing technology sectors.
The company also announced its plan to kill WebOS-based phones and the TouchPad tablet, which was launched in June, but failed to excite consumers.
Like other PC makers, analysts said HP was struggling to come up with an answer for Apple's iPhones and iPads, which are gobbling up PC market share.
Had HP followed through with its spin-off plan, the move would have been the most radical shift in the PC market to date, creating the potential for the emergence of a dominant player.
The move would have been bigger than when IBM sold its personal computing arm to Lenovo in a $1.75 billion deal, six years ago, when personal computing was not nearly as massive as it is now.
Although PSG has leading global positions in the consumer and commercial PC segment, this area is known for its wafer-thin margins, and global sales are slowing as consumer interest shifts to tablets.
Backtracking
The company's decision to keep PSG follows its almost immediate retraction of its plan to can the TouchPads.
HP decided to have "one last run" of TouchPads days after declaring it will kill off the line of tablets that failed to challenge Apple's command of the booming market.
This came after an unexpected demand for the product generated by a weekend fire-sale.
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