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HP plotting PC spin-off, Autonomy purchase?

By | August 18, 2011, 9:53am PDT

Summary: HP CEO Leo Apotheker is reportedly plotting a bold move to remake the company by shedding its PC unit.

HP is reportedly planning to buy Autonomy for $10 billion and unveil plans to spin off its PC business.

According to Bloomberg, HP may announce these plans as early as today. At the least, HP will have to address the issue when it reports its quarterly earnings later today.

If such moves play out, HP will dramatically change the profile of the company and look more like long-time rival IBM.

IBM shed its PC business—the unit that became Lenovo—and ditched other low margin businesses such as printers, which became Lexmark. During that transformation, IBM doubled down on software and services. Those businesses have a better margin profile and are more resilient to global economic fluctuations.

HP’s move to shed the PC business would definitely come at a tough time for the company. Consumer PC demand has lagged, but the corporate upgrade cycle remains solid.

Former HP CEO Mark Hurd had argued that the company needed to sell a complete stack of gear—including PCs. Leo Apotheker, current CEO, obviously begs to differ.

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Topics

Hewlett-Packard Co., Autonomy Corp. Plc, PC, Desktops, Hardware, Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic.

Disclosure

Larry Dignan

Larry Dignan has nothing to disclose. He doesn’t hold investments in the technology companies he covers.

Biography

Larry Dignan

Larry Dignan is Editor in Chief of ZDNet and SmartPlanet as well as Editorial Director of ZDNet's sister site TechRepublic. He was most recently Executive Editor of News and Blogs at ZDNet. Prior to that he was executive news editor at eWeek and news editor at Baseline. He also served as the East Coast news editor and finance editor at CNET News.com. Larry has covered the technology and financial services industry since 1995, publishing articles in WallStreetWeek.com, Inter@ctive Week, The New York Times, and Financial Planning magazine. He's a graduate of the Columbia School of Journalism and the University of Delaware.

For daily updates, follow Larry on Twitter.

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HP Demolished by Incompetent Bean Counters
Dave Jensen 31st Aug
Apotheker doesn't seem to want to do anything that's "hard" or that requires engineering, or that involves competition. How is HP fallen!

Leo Apotheker was unexpectedly let go from SAP, amid customer and employee discontent, before being hired by HP. How HP's board ever made such a stupid decision to hire this guy is unimaginable, although it seems consistent with their hiring of Fiorina and then Hurd, who were nearly as incompetent. But Apotheker seems like the final straw when it comes to incompetence, and the final nail in HP's coffin.

HP used to be a high tech company. Its first mistake was spinning off Agilent, it seems like things went downhill from there. I'm surprised that the employees don't stage some sort of revolt.

While this doesn't give the whole picture, it's interesting to note how HP's leaders' education credentials trended...might at least give a clue here:

Dave Packard MS Elect Engineering from Stanford
Bill Hewlet MS Elect Engr from MIT
John Young BS Elect Engr, Oregon State; MBA, Stanford
Lewis Platt BS Mech Engr, Cornell; MBA, Wharton
Carly Fiorina BA, Philosophy & Medieval History, Stanford; MBA,
Robert H Smith School of Business; MS in Mgmt from Sloan School of
Mgmt
Mark Hurd Bachelor of Bus Admin, Baylor University
Leo Apotekher Studied Economics at Hebrew University in Jerusalem
View in thread
0 Votes
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Wow!
mgw@... 18th Aug
As a lontime Compaq Systems Engineer, I was disappointed when HP gobbled up Compaq, as Compaq was the more innovative of the 2 companies in the PC and server markets. I was relieved to see that Compaq products pretty much replaced HP products in the combined firm, where there were overlaps. To see the PC division discarded now is a big disappointment. Maybe the spun-off company will be called...

COMPAQ!
0 Votes
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RE: HP plotting PC spin-off, Autonomy purchase?
Theseus Updated - 18th Aug
From a business growth standpoint, there's no question that the PC business is in decline. You can still make money in it, but it'll be left to the Asian manufacturers.

A company like H-P needs growth markets, or else their investors and Wall Street will pound them into oblivion.

Reminds me of IBM's shedding their PC business, handing it off to Lenovo. It worked for them, but it's no guarantee that H-P can pull that off.

H-P doesn't really 'get' consumer devices, if the Touchpad is any indication; same with Dell. They're both OEMs, culturally and in mind-set, in a changing world where that business isn't what it was.

They can't be Apple. Apple is basically the 'new Sony', or rather what Sony used to be---a premier consumer gadget company.
0 Votes
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RE: HP plotting PC spin-off, Autonomy purchase?
bitcrazed 18th Aug
I would be VERY surprised if HP was to sell of it's PC division. From HP's 2010 statements, it's a $32Bn business generating $2Bn profit annually. Most of HP's services engagements come off the back of their PC and Server presence.

IBM *HAD* to gut, re-structure and then sell-off their PC business because they were completely out of the game and left behind by everyone else. Back in the day, IBM were leaking money so quickly that it many thought IBM would go belly-up. It became legendary how Gerstner turned them around and rescued IBM from bankruptcy.

Gerstner chose to focus IBM on delivering solutions to its customers, even if it meant selling products from their once competitors.

HP on the other hand has neither the live-or-die need to sell off its PC business, nor does it have the services scope and depth that IBM already had been building for years when they decided to abandon the PC market.

If HP does sell-off its PC division, I suggest that HP's actions are more to do with envy and wanting to become IBM, than a truly sound business strategy.

It'd also be interesting to see if HP was to shed its Palm hardware division as part of such a sell-off.
0 Votes
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RE: HP plotting PC spin-off, Autonomy purchase?
Theseus 18th Aug
@bitcrazed
I think this H-P rumor/news can go hand in hand with yesterday's Dell news---that Dell's consumer PC business is likewise in steady decline.

The lesson being, that it's no longer a growth business, the PC laptop/desktop business, unless you're Apple or Sony (with their Vaio line) selling niche, premium high end PCs.

If H-P really is getting out of that business, I predict somebody like ZT will scoop that up. Somebody like them can make it work, even licensing the 'H-P' brand name, without living or dying on quarter to quarter Wall St. big bank analysts' focus on growth.
0 Votes
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RE: HP plotting PC spin-off, Autonomy purchase?
scotth_z 19th Aug
@bitcrazed
Actually IBM sold their PC division a little late. IBM had already turned around their mainframe business in 2000, when they released their z-series and had already realized that margins in services and software were ALOT higher than PCs and were dominating with Global Services, which eventually forced EDS into HPs hands. If anything, IBM sold their PC sector a little late, they probably could have gotten $2-4 B more, if they had sold it 2 years earlier.

IBM realized a while ago, that margin is alot higher in software, services and high end servers than in the low end market and moved accordingly.

HP has some problems... they gutted their service division, for short term gain, they neglected/starved their high end server division to the point where they basically turned it's future over to Intel(and we can see the result, with Oracle's move to discontinue it's database systems on Itanium) and they tried to buy their way into profitability by spending money on areas that were 2nd rate(Palm) or questionable about it's end(Compaq, EDS).

The real question is, what will HP be in 5-10 years time. It is probably too late to try and be the IBM doppleganger, more like it's shadow, to me.
0 Votes
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RE: HP plotting PC spin-off, Autonomy purchase?
raleighthings 18th Aug
IBM's PC businesses didn't become Lenovo. Lenovo already existed as a large Chinese PC company. They sold the business to them.
0 Votes
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Maybe but most people in the US did not
James Quinn 18th Aug
@raleighthings .. now who Lenovo was until the sale. So like MS before IBM pretty much made Lenovo in the eyes of many in the US at least and likely boosted Lenovo's credit elsewhere as well.

Pagan jim
0 Votes
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HP or who ever ends up owning HP's PC division has a chance
James Quinn 18th Aug
to become another Apple with WebOS. Owning you're own OS and developing Apps and hardware to work with that OS is a key factor granted but it is NOT enough on it's own. Keep the PC sales side to provide revenue as you start up you're mobile ecosystem which includes a WebOS store like iTunes that not only includes Apps but music and movies, TV Shows and books. But even this is not enough HP or whoever has to be dedicated to the consumer not dabble or stick a hesitant toe into the water like the Touchpad. They (and this is the hardest part) have to change their mind set and develop a serious R&D environment focused on how to make existing tech BETTER for the user and new tech. Focus on the WHOLE is greater than the sum of it's PARTS company and keep a firm control on the user experience. Some will hate it but some will love it... That is what it is. In each case Jack of all trades.. Master of none or being the Master of some there are advantages and dis advantages but in ether case it is clear you can't please everyone so why try?

Pagan jim
0 Votes
+ -
HP Demolished by Incompetent Bean Counters
Dave Jensen 31st Aug
Apotheker doesn't seem to want to do anything that's "hard" or that requires engineering, or that involves competition. How is HP fallen!

Leo Apotheker was unexpectedly let go from SAP, amid customer and employee discontent, before being hired by HP. How HP's board ever made such a stupid decision to hire this guy is unimaginable, although it seems consistent with their hiring of Fiorina and then Hurd, who were nearly as incompetent. But Apotheker seems like the final straw when it comes to incompetence, and the final nail in HP's coffin.

HP used to be a high tech company. Its first mistake was spinning off Agilent, it seems like things went downhill from there. I'm surprised that the employees don't stage some sort of revolt.

While this doesn't give the whole picture, it's interesting to note how HP's leaders' education credentials trended...might at least give a clue here:

Dave Packard MS Elect Engineering from Stanford
Bill Hewlet MS Elect Engr from MIT
John Young BS Elect Engr, Oregon State; MBA, Stanford
Lewis Platt BS Mech Engr, Cornell; MBA, Wharton
Carly Fiorina BA, Philosophy & Medieval History, Stanford; MBA,
Robert H Smith School of Business; MS in Mgmt from Sloan School of
Mgmt
Mark Hurd Bachelor of Bus Admin, Baylor University
Leo Apotekher Studied Economics at Hebrew University in Jerusalem

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