HP’s PC Division Reprieved, Tablets Still In Abeyance

Hewlett-Packard has said it will now keep its Personal Systems Group (PSG), reversing a decision that would have potentially spun off HP’s profitable PC-manufacturing division.

“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG,” Meg Whitman, HP’s CEO and president, wrote in a statement. “It’s clear, after our analysis, that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees.”

Dispelling the doubts

In a conference call, Whitman told media and analysts that HP’s previous decision had “confused the market pretty dramatically” but that the company was moving to eliminate that uncertainty. “We’re going to fight for every order,” she said, alluding to PSG sales.

An HP “data-driven evaluation” revealed PSG as not only deeply baked into all of HP’s lines of business (including supply chain, IT and procurement), but also a significant contributor to overall brand value – too valuable, apparently, to divest and recreate as a standalone company, according to the tech giant.

In essence, HP’s decision to keep PSG is a partial refutation of the company’s abrupt about-face earlier this year, one that saw the company kill its webOS-powered TouchPad tablet, announce plans to either partially or fully divest itself of PSG, and move to position itself first and foremost as a software-and-services concern. That strategy, established by ex-CEO Leo Apotheker, was met with shock and mixed reviews by pundits and analysts.

Apotheker, who had come to HP from German enterprise-software maker SAP, had advocated software and services as the way forward. He also argued that low margins and slower sales made the PC business a less attractive proposition. But as criticism continued and HP’s stock plunged, the company’s embattled board forced him out of the CEO role on22 September and appointed Meg Whitman former eBay CEO and one-time candidate for governor of California candidate  in his place.

Comforting the shareholders

Whitman previously sat on HP’s board of directors. Soon after taking her new position, she worked to reassure investors and employees of HP’s continued viability after two CEO shake-ups in less than two years. She also indicated that a decision about HP’s PC business would be made by the end of October.

“It’s a decision I want to make much faster than my predecessor,” she told a conference on 4 October, according to Bloomberg BusinessWeek.

Despite terminating its tablet plans, HP claimed it would potentially licence webOS to other companies. Any company that takes webOS off HP’s hands would likely acquire a host of patents useful in the increasingly litigious mobility space.

During the conference call, Whitman suggested that a decision on webOS software would be coming soon. “I think we need to be in the tablet business,” she said. “We’re certainly going to be there with Windows 8, and we’re going to make a long-term decision about webOS.”

Now that Whitman has settled the awkward question of what HP will do with one of its signature divisions, her next big step is ensuring the company’s stockholders and financial analysts that HP is back on track and ready to put the last year of uncertainty behind. That will happen on 21 November, when HP details its financial fourth-quarter earnings.