HP's business restructure, too fast or too smart?

Updated: 2011-08-19 10:50


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SAN FRANCISCO - Three days after Google's blockbuster engagement with Motorola Mobility, Hewlett-Packard Co (HP) on Thursday announced to kill its mobile business and a possible spin off of its PC division. In an age when iPad and iPhone make money everywhere, does this business restructure come too fast, or it is simply too smart?

PC spin off

In its newsy statements on Thursday, HP said its board has authorized the exploration of strategic options for its PC business, which could include a "full or partial separation."

HP is currently the world's largest maker of personal computers. Its business has been expanding since it merged with Compaq almost ten year ago, but it is now the lower-margin division in the company.

"Consumers are changing the use of the PC and the plan to separate PSG (Personal System Group) is to sharpen HP's focus on cloud and other services," HP CEO Leo Apotheker said on a conference call Thursday afternoon.

Under the influence of diminishing PC consumer demand, PC sales in the current quarter is expected to be $32.1 billion to $32.5 billion, HP reported in its quarterly earnings on Thursday. The number is below the average $34 billion projection of Wall Street.

For most analysts, HP is making a bold move before the PC business become an anchor for the future development of the company. If it works out well, HP's decision may echo IBM, which sold off its ThinkPad computer business to Lenovo, the biggest PC maker in China.

Apotheker said during the conference call that HP anticipates it will take 12 to 18 months to complete the process of PC spin off.

Mobile shutdown

Last April, HP acquired webOS mobile operating system developer Palm which, since then, has been responsible for the webOS-based hardware products in HP, from tablet computers to smartphones.

In July, HP cut the price of its first tablet device TouchPad by 20 percent, which was only introduced in February. There have been reports that TouchPad had bleak sales in the market. On Wednesday, technology news site AllThingsD reported that Best Buy was sitting on 270,000 unsold TouchPads and was hoping HP would buy them back.

As for smartphone market, IDC statistics show that the top five manufactures sold three quarters of the world's smartphones, and HP did not make the top five.

However, a complete shutdown of webOS devices is still unexpected. Analysts pointed out that HP has not really invested in building the ecosystem and getting developers invested in the webOS platform.

"You can't really throw a new OS and associated devices into the market without investing as heavily into the ecosystem," wireless analyst Chetan Sharma told AllThingsD Thursday.

He noted that HP should have invested for two to four years to really see much payoff, as it has been obvious for some time that there can be no OS business without a thriving ecosystem of partners and developers.

On the other hand, as most of the headlines in the smartphone market are dominated by Apple, Google and even Microsoft, it seems that there would not be enough room left for HP.

"The devices aren't getting any traction and continuing to execute in this market is no longer in HP's interest," Apotheker said during the conference call, noting the webOS hardware business will be shut down by the fourth quarter this year.
As for the software's future, HP said it will not walk away from webOS and plans to license it.

Software in cloud

For the future development, HP announced to focus on the high end server and software markets, which reflects CEO Apotheker's background in software industry. He was in the software industry for two decades and once served as CEO of German enterprise software giant SAP AG.

"More value-added intellectual property. More software. More big data. More cloud," the CEO outlined his future strategy Thursday afternoon.

He also hailed the upcoming $10 billion acquisition of British software company Autonomy  as "a milestone" for HP.

"We believe this transaction will unlock synergies across multiple industry verticals. We are building a strong HP software business," he said.