What is HP thinking?

HP's plan to sell off its PSG unit looks ill-judged

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By  Mark Sutton Published  August 19, 2011

HP's announcement that it is considering getting rid of its PC business has left more than a few people asking ‘what on earth is the company, and CEO Leo Apotheker in particular, thinking?'

During a third quarter analyst call, Apotheker, who has been at the helm at HP for less than a year, said that the company was considering spinning off or selling its PC business, the PSG unit. It was a fairly woolly comment, with no indication if the company had any hard and fast plans as to what it will do with PSG, potential buyers and so on. Instead Apotheker effectively doomed the business to a slow death.

The other part of the announcement, that HP is to bin its Touchpad tablet after less than one month of sales, is somewhat more understandable, but no less flakey, in my opinion. Table and the WebOS phones were beginning to look like a bit of a white elephant, and a distraction to the core PC business - but to get out of tablet, which is a segment with a lot more potential to be realized yet, after such a short time, seems like the actions of a company that is struggling to find its way.

The PC market is weaker than ever, and undoubtedly moving towards commoditization, but I don't believe that HP PSG was performing so badly that it had to go. PSG was responsible for 31% of HP's total revenues in most recent quarterly results, shipments were up in Q2, and HP is still the market leader, with 18% of the worldwide PC market in Q2.

Tablet may be the talk of the town, but it's still a small fraction of the overall PC market when compared to desktops and notebooks. One issue pointed out by IDC is HP PSG had been performing well in enterprise sales, as enterprises pick up the refresh cycle. But those enterprise buyers won't want to commit to HP's products if the future of PSG is up in the air, they demand stability from their suppliers.

There was also no mention of HP's lucrative printing business, the IPG unit. One of the selling points of HP is that it does it all, from print to servers and services. If PSG goes, then HP becomes a company that does enterprise hardware, software and services, with a nice sideline in printer cartridges - why stay in one part of the low-end hardware business but not another? Will focusing on software and services also mean the end for IPG?

Apotheker's announcement to me seems to be an ill thought out reaction to please the investors and the markets, without much work behind it to plan a future for PSG. It potentially marks the sad loss of a reputable brand from the PC market. IBM made a bold strategic move in selling off its PC business, and HP has been slowly building up its services and software offerings, but it is not at the same level as IBM was, and the loss of PSG is going to take a big chunk out of HP's revenue. And if HP doesn't end up selling PSG, then what the hell was Apotheker thinking?! This looks more like badly-planned pandering to the market rather than a solid strategic gambit.

2278 days ago
Ben A. Marcantonio

Have bought many HP products primarily based on the Company's long and hard earned reputation.

What HP is now doing is turning itself into a "Fickled Bitch" and absolutley destroying it's long earned intregrety.

HP's recent divorce of its resently released TouchPad puts HP right at the top of the "Best of Bullshitters" pile and Number 1 on the "Best Scam of the Year" award.

How can anyone ever believe in anything HP will ever releases into the open market again. This sweet lady just turned whore...you'd better do a turn around or it's good by bitch for me!

HP - How could you have done this to yourself ?

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