HP: Spinning PC unit off would have cost billions

The costs, combined with other factors, were a reason why HP decided to retain the PC unit

Spinning off its PC unit would have been too costly for Hewlett-Packard, and that was one of the reasons why the company backed off from the plan it announced in August, according to an HP executive said.

The cost of spinning off the unit would have amounted to US$1.5 billion in one-time costs and additional payments at later dates, said Tony Prophet, senior vice president of operations at HP's Personal Systems Group (PSG) unit, which deals in PCs, smartphones and tablets.

"As the analysis unfolded, it became clear the costs were much more significant than any potential benefit," Prophet said.

HP on Thursday said it had decided to keep its PC division after flirting with either selling or spinning it off -- a plan that had been put in motion by former CEO Leo Apotheker. HP was exploring alternatives for the low-margin PSG business in order to concentrate on more profitable business areas such as enterprise software, services and hardware.

Keeping the PSG within HP is "right for customers and partners, right for shareholders, and right for employees," Meg Whitman, HP's president and CEO, said in a statement on Thursday.

The company had close to 100 people -- executives, customers and legal advisors -- working to evaluate whether to retain or spin-off the PC division, Prophet said. Other factors in the decision to retain the unit were customers' wishes and the component purchasing power provided by the PC unit, said Prophet.

Some HP enterprise customers previously expressed dissatisfaction with the company's decision to sell or spin-off PSG, saying they wanted to buy products from a single entity instead of going to multiple organizations for software and hardware purchases. Analysts have said that the PC business helped HP acquire hardware at cheaper rates, and that it also provided strong distribution and logistics capabilities, which were key for the printer and enterprise hardware businesses.

A lot of due diligence went into deciding to retain the PC unit, and there's no turning back, Prophet said.

"You can be certain that there was deep and thorough analysis behind this," Prophet said.

The PSG unit was valued at around $8 billion by an analyst in August when strategic alternatives were being explored. The high price made it tough sell in a down market in which other PC makers were struggling.

While competitors tried to prey on the uncertainty surrounding HP's PC business, there is no sign it was affected by that over the last few months: Prophet said that PC shipments grew in the third quarter.

HP remained the world's top PC maker during the third quarter, according to IDC. The company's PC shipments totaled 16.6 million units, growing by 5.3 percent compared to the previous year's third quarter. After Lenovo, Dell was the third largest PC maker, with the company's PC shipments dropping by 1.6 percent year-over-year.

Looking ahead, Prophet said HP's future PC and tablet strategy revolves around Microsoft's upcoming Windows 8 OS. Microsoft has not announced a release date for the OS, but a top Intel executive earlier this month said the OS would be released next year.

"Obviously the major trends and the most important transition point will be Windows," HP's Prophet said. "We intend and are working to be a leader with Windows 8."

HP will release a Windows 8 tablet in the future, and also ultrabooks with the OS. Ultrabooks are being promoted by Intel as a new category of thin-and-light PCs with tablet-like features.

Meanwhile, the fate of HP's webOS mobile platform hangs in balance. The company is still analyzing what to do with webOS, Prophet said.

In August, HP said it would keep webOS but kill smartphones and TouchPad tablets based on the OS. A buying frenzy ensued after HP sold remaining TouchPad tablets starting at $99. Smartphones such as Palm Pre and Pixi also sold out in the fire sale.

Prophet did not comment on the eventual fate of the TouchPad, but a company spokeswoman said support for the device will continue. It's too early to comment on smartphones, Prophet said.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags business issueshardware systemsdesktop pcstabletslaptopsHewlett-Packard

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Agam Shah

IDG News Service
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Ben Ramsden

Sharp PN-40TC1 Huddle Board

Brainstorming, innovation, problem solving, and negotiation have all become much more productive and valuable if people can easily collaborate in real time with minimal friction.

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?