Arik Hesseldahl

Recent Posts by Arik Hesseldahl

HP Will Keep PC Division

The decision has just been made public: Hewlett-Packard is staying in the PC business.

It had become apparent that the spinoff option was not going to happen primarily because it would hurt HP in ways it had perhaps not considered. Being the world’s leading maker of consumer and corporate PCs gives HP a great deal of leverage with component suppliers like Intel, Advanced Micro Devices, Seagate and others, and helps its strategically important server business. PCs carry slim margins; servers don’t. Losing that negotiating power would have hurt the more profitable server business, so naturally the PC business had to stay.

A spinoff made even less sense when the market research firms Gartner and IDC reported that HP had, despite the uncertainty created by its decision made over the summer to “explore strategic options” for the unit, grown its PC market share and taken business away from rivals Acer and Dell.

However, the first question I have is this: What happens to the head of HP’s Personal Systems Group, Todd Bradley? He stood a fairly good chance of becoming the CEO of the new company had HP gone through with the spinoff. Does he stay or does he go, and under what circumstances? And if he goes, where will it be? The fact that he’s quoted in the press release suggests he’s staying.

The decision marks the first significant reversal of course by HP’s new CEO Meg Whitman, who took over when the company’s board of directors ousted Léo Apotheker after a rocky, 11-month tenure.

HP shares, which finished the day up more than 1 percent to close at $26.99, are trading up slightly after hours.

Here’s the announcement, courtesy of HP. I’ll be adding more as I go through the details.

HP to Keep PC Division

Continued combination of HP and its Personal Systems Group expected to deliver greater customer and shareholder value
PALO ALTO, Calif., Oct. 27, 2011

HP today announced that 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 Meg Whitman, HP president and chief executive officer. “HP is committed to PSG, and together we are stronger.”

The strategic review 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.

The outcome of this exercise reaffirms HP’s model and the value for its customers and shareholders. PSG is a key component of HP’s strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers. The HP 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.

PSG has a history of innovation and technological leadership as well as an established record of industry-leading profitability. It is the No. 1 manufacturer of personal computers in the world with revenues totaling $40.7 billion for fiscal year 2010.

“As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry’s broadest portfolio of PCs, workstations and more,” said Todd Bradley, executive vice president, Personal Systems Group, HP. “We intend to make the leading PC business in the world even better.”

More information is available at www.hp.com/investor/PSG-Decision.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure at the convergence of the cloud and connectivity, creating seamless, secure, context-aware experiences for a connected world. More information about HP (NYSE: HPQ) is available at http://www.hp.com.


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