HP decides to keep its PC division

HP has decided that its Personal Systems Group (PSG) "will remain part of the company". The idea of selling or spinning off the PC division had been floated by Léo Apotheker, who was very quickly shown the door.

HP has decided that its Personal Systems Group (PSG) "will remain part of the company". The idea of selling or spinning off the PC division had been floated by Léo Apotheker, who was very quickly shown the door. In much less time than the previously mooted "up to 18 months", HP announced today that it had "completed its evaluation of strategic alternatives" under Apotheker's replacement as CEO, Meg Whitman.

"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 Whitman, in HP's official statement. "HP is committed to PSG, and together we are stronger."

The statement said "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". In other words, being the world's largest PC supplier helps HP's other divisions sell printers, software and services.

PSG has an annual turnover of $40.7 billion and generates about $1 billion in operating profits.

In a conference call with analysts, Whitman pointed out that, without PSG, HP would "lose synergies in the channel, sales, and marketing". In other words, its buying power brings down component and procurement costs, and its distribution network benefits other HP products.

Further, spinning off PSG as a separate company could require spending $1.5 billion on start-up costs such as marketing, IT systems, support and finance, according to chief financial officer Cathie Lesjak. "The costs and risks of a spinoff would be far greater than any value we could create," said Whitman.

Whitman's prompt action is intended to reassure customers and remove the uncertainty created by the earlier announcement that the PC division might be sold or spun off. Whitman said one of HP's biggest customers had told her "Uncertainty is not your friend here." She said: "We confused the market pretty dramatically on August 18."

It's still not clear what will happen to WebOS, acquired when HP bought Palm, or to the tablet business killed by Apotheker. However, HP does seem to be optimistic about the prospects for Windows 8 tablets, notwithstanding its failure to make any impact with a much-hyped Windows 7 "slate".

Whitman said HP would decide what to do with WebOS later this year.

@jackschofield

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