Hewlett-Packard's strong PC business and the PC market evolving at a faster pace than the rest of the IT industry are signs that it is timely to let the company's personal systems group (PSG) become an independent entity, according to an HP executive.
In an interview Wednesday with ZDNet Asia, Luciana Broggi, vice president and general manager of channel sales organization at HP Asia-Pacific and Japan's PSG business unit, reiterated the company's stance that a spinoff of PSG is HP's "best and preferred" solution. However, other options are "still on the table" as the company takes the time to assess the different implications, she stressed.
Two weeks ago, the IT giant announced that it is considering "strategic alternatives" for its PC business unit, including a spinoff or selling off the PSG unit. A Gartner analyst ZDNet Asia spoke to believes that the spinoff option is "viable" for HP.
The company will confirm the decision by the end of the calendar year, Broggi said, adding the timeframe of "12 to 18 months" previously reported is the amount of time needed to implement the change such as separating the assets and human resource. Based on HP's experience with Agilent, "it takes a good year to really separate a big portion of the company", she noted.
According to Broggi, HP would consider a PSG spinoff only when PSG is "doing well". The current PSG, she pointed out, has "a very good chance" to continue delivering good results as well as grow as it has done so in the last several years as a standalone entity.
"[PSG] as a 'company'--if you look at it as a sub-company of HP--is the most profitable in the PC industry," said Broggi. "It's a big company, solid, independent, and probably most profitable in the industry."
HP was ranked as the top PC vendor worldwide in the second quarter of 2011, according to research analysts Gartner and IDC.
Broggi also claimed that the recent announcement had not been a surprise to many in the industry, as since HP PSG's merger with Compaq, there are constant calls for the company to spin off its PC unit. It has did not happen as "it didn't make any sense to sell or spin off a company which is not doing well", she said.
Spinoff to respond faster to market change
Another reason that a spinoff is good is that PSG will be able to respond to market changes faster, said Broggi. PCs, she noted, are highly commoditized, despite the innovation that goes into the devices.
The PC industry is becoming similar to the fashion industry with its short cycles and consumers deciding a PC purchase based on the color and design of the device, she said. Thus the PC market is becoming more and more different compared with the rest of the IT business such as servers or software.
"[The PC business] is a business that has very fast cycles that have a fast turnaround. It also needs a very high level of flexibility in responding to the market changes and trends," Broggi said.
According to her, channel partners are also supportive of a spinoff as they see it as an opportunity for the unit to become leaner and thinner in the execution of some of the strategic opportunities. Channel partnerships are an important element in the Asia-Pacific and Japan region as they account for 90 percent of HP's PSG revenues, she shared.
The channels team has been communicating to "a fair amount of channel partners" in the last week, added Broggi. They wanted clarity on HP's seriousness in the PC business, she said, noting that the company is not changing its corporate direction.
"The strategy that we have been talking about the past month is still the same going forward," she said. "We will have a very strong focus on commercial and consumer, [and on] both volume and premium product."
That said, she noted that the company had announced in June that there will be more emphasis on the premium side of the PC business in the consumer space to grow its share in the mid- and high-end segments of the market.
The company, which is already selling in 170 countries, will also continue its strategy to be in all parts of the world, she said. There will be "very strong focus" in Asia-Pacific and Japan, particularly in the emerging and fast growing markets as "the future will come" from such markets.
HP, added Broggi, has also provided material for its channel partners to communicate to end customers about the company's commitment to delivery, service, warranty and other commitments.
When asked about Dell CEO Michael Dell's comments on HP's PC business following the announcement, Broggi admitted that the company's decision to leave the options open had created questions in others' minds.