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HP TouchSmart 610
HP looks to get out of PC hardware business to focus on software solutions

The bombshells from HP continue to fall from the sky. Earlier today, it was confirmed that HP is abandoning the webOS platform which it acquired from Palm for $1.2 billion USD just over a year ago. Now, were hearing reports that HP plans to announce that it will sell off its Personal Systems Group (PSG) which is responsible for consumer and business PCs.

The company stated in a press release:

HP also reported that it plans to announce that its board of directors has authorized the exploration of strategic alternatives for its Personal Systems Group (PSG). HP will consider a broad range of options that may include, among others, a full or partial separation of PSG from HP through a spin-off or other transaction. 

To many, this may seem like a strange move considering that HP is the number one seller of computers in the world (we're sorry Apple, but we're not going to count the iPad).  According to Garner, HP shipped over 14.8 million PCs during the second quarter of 2011 to secure 17.5% of the market. Dell was the next closest with 10.6 million/12.5%.

IDC produced similar figures and reported that HP shipped 15.2 million PCs/18.1% compared to 10.9 million/12.9% for Dell.

Despite HP's beastly PC shipments, the never-ending race to the bottom when it comes to final transaction prices for consumers means that there's little room for profit in this cutthroat business. While Apple can get away with charging customers $999 for an 11" notebook or $2,499 for a 17" desktop replacement notebook, PC users tend to be more price sensitive.

A June report from The Loop suggests that Apple makes more money from selling just one computer than HP does from selling seven. 

Bloomberg reports that HP, which is helmed by Leo Apotheker, wants to leave the hardware business behind and focus on its more lucrative software and cloud services offerings. “This is the direction we want him to take,” stated ISI Group analyst Abhey Lamba. “Get out of a low- margin business and focus more on his core competency, which is software.”

More specifically, HP has laid out these three keys for its new "company transformation":

 

 

  • Move HP into higher value, higher margin growth categories
  • Sharpen HP's focus on its strategic priorities of cloud, solutions and software with an emphasis on enterprise, commercial and government markets
  • Increase investment in innovation to drive differentiation

 

HP also announced its earnings today, and revenue for the third fiscal quarter was up slightly to $31.2 billion USD compared to $30.7 billion USD during the same quarter last year.

 



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What?
By Samus on 8/18/2011 5:09:45 PM , Rating: 4
Who do they think they are? IBM?




RE: What?
By Hyperion1400 on 8/18/2011 5:17:26 PM , Rating: 3
No, IBM still makes computers :P


RE: What?
By jvillaro on 8/18/2011 5:37:14 PM , Rating: 3
They sold part of that business to Lenovo...


RE: What?
By spread on 8/18/2011 6:33:40 PM , Rating: 4
And kept the really profitable part, the server side and custom fabricated CPUs.

On the other hand Lenovo is also making a killing and releasing some nice hardware so maybe IBM couldn't cope with consumer level products.


RE: What?
By GulWestfale on 8/18/2011 6:39:50 PM , Rating: 3
if they sell their PC unit and shut down webOS/palm, then what's left, exactly?

kinda like motorola; their CPU division became 'freescale', and now their cellphone business is going to google... what do they still make?


RE: What?
By drycrust3 on 8/18/2011 8:16:44 PM , Rating: 2
The stupid part about it is they didn't like Compaq making better PCs than them, so they bought them and disbanded Compaq's R & D teams. Now they have decided they don't want to be a PC maker after all, so they have effectively binned two highly reputable brands.


RE: What?
By Golgatha on 8/18/2011 8:22:24 PM , Rating: 5
Never thought I'd hear Compaq referred to as a highly reputable brand. That's like saying E-Machines is a boutique PC.


RE: What?
By Solandri on 8/18/2011 11:33:26 PM , Rating: 2
Towards the end they weren't, but once upon a time Compaq was the company which created the PC-compatible industry. They were the first to reverse-engineer IBM's PC BIOS, which helped catapult them to the global lead in PC sales.

But yeah, the last time I had to fix a Compaq, the problem was a busted 3.5" floppy drive. No problem, I thought, I had plenty of extra floppies. I tried them, only to find out that Compaq had programmed their BIOS to only recognize Compaq floppy drives. I had to order one from them for $50(!) to get the computer working again.


RE: What?
By Samus on 8/19/2011 1:33:15 AM , Rating: 2
Compaq is the whore that used Torx and an F10 bios keystroke.

Don't get me wrong, one of my first PC's was a Prolinea 4/25s and it was a good PC. I would have rather had an IBM 486 with OS/2 Warp (at least before Windows95 came out) but it was free, the year was 1991, and I was 10.

But it lay somewhere between superior homebuilt PC's with Asus motherboards that had VLB and eventually PCI slots, and *caugh* Packard Bell. Not exceptional, and not unreliable crap. Infact, it took an Intel DX4/100 Overdrive and I used it until the socket-7 K6 came out and built my next PC around it.

The reason HP bought Compaq was for the complete opposite reason they are announcing what they are today. 10 years ago, they wanted the consumer market, and now, they appearantly don't.

Mark Hurd must be laughing himself to death. I'm sure he's quite comfortable at Oracle as the HP empire crumbles under poor management.


RE: What?
By goriders on 8/22/2011 3:55:00 PM , Rating: 2
Except that the entire Palm acquisition was a Hurd deal. Smart guy, no doubt but he also should be eating a 2nd serving of humble pie. He doesn't sound a whole lot different than Stephen DeWitt - http://www.zdnet.com/blog/btl/hp-ceo-mark-hurd-tal...

To paraphrase talking Barbie, "Tech is hard!". I mean really what are they to do? Killing WebOS is probably the right choice - it wasn't likely to succeed so cutting your loses isn't a bad idea.

But the big question is "Where do you go from here?". It appears that they figure moving up the food chain to enterprise hardware/software is going to be easier than servicing fickle customers. The Autonomy acquisition seems indicate that this is where they want to live.

Consumer devices is absolutely brutal. Six month product cycles, no loyalty, dealing with OEMs, distribution partners, low margins, etc. If anything goes slightly off the rails, your product is dead.

I'm no Apple fan-boy....but I can't think of any other company that was able to pull out of the nose dive and recover to such lofty heights. Steve Jobs is underpaid - do you really think that this happens without him? And as great as Jobs is...they were lucky, lucky, lucky.

HP was not about to go toe-to-toe with Apple and win. IBM, Alcatel, Intel...all of those guys are going to give Apple a wide birth. Google appears to be the only heavyweight capable taking them on.

HP is in a heck of a mess at a time when companies are looking to cut back on capital spending. I expect to see layoffs every quarter or every 2nd quarter for the next couple of years.

Leo Apotheker is either going to earn his salary or history will judge him as the man who put gasoline on the fire.


RE: What?
By ilt24 on 8/18/2011 8:28:47 PM , Rating: 2
quote:
if they sell their PC unit and shut down webOS/palm, then what's left, exactly?


Services, Servers, Storage, Networking and Printers.


RE: What?
By teldar on 8/18/11, Rating: -1
RE: What?
By Cheesew1z69 on 8/19/2011 8:12:35 AM , Rating: 2
Motorola MOBILITY was bought by Google....


RE: What?
By Samus on 8/19/2011 12:42:31 PM , Rating: 2
Right, but what else does Motorola make? Cable modems....and, umm....


RE: What?
By CZroe on 8/19/2011 1:07:01 PM , Rating: 3
I take it that you didn't spend more than two seconds thinking sbout thst. Motorola is a very old company. They may have invented cellphones, but they made long and short range radios and satellite equipment before that. They still operate satellites in orbit, control communications and broadcast signals, roll out state-wide radio networks, and sell walkie-talkies to police forces around the planet. That's only the tiniest fraction of what they do.

Also, Motorola Mobility included the set-top box snd cable modem division.


RE: What?
By iamezza on 8/20/2011 11:10:43 AM , Rating: 2
you should probably remove that chewing gum stuck between your a and s keys ;)


RE: What?
By CZroe on 8/19/2011 1:07:41 PM , Rating: 2
Read my reply to Samus below.


RE: What?
By TakinYourPoints on 8/18/2011 6:57:42 PM , Rating: 2
There is a lot to be said for simplifying and streamlining a business leading to greater efficiency, profit, and customer service.


RE: What?
By GulWestfale on 8/18/2011 7:01:27 PM , Rating: 2
how many customers will they have after they sell the company?


RE: What?
By Hieyeck on 8/19/2011 11:35:40 AM , Rating: 2
Servers. Racks. Storage. Network. Printers. Scanners. etc. etc. etc.

Obviously you don't work in IT.


RE: What?
By spamreader1 on 8/18/2011 5:37:55 PM , Rating: 1
really? hmm, I thought they only still made servers. When did this happen. Isn't thier pc/laptops still spun off to lenovo?


RE: What?
By sviola on 8/18/2011 5:53:14 PM , Rating: 2
They don't make PCs or laptops. Only servers, mainframes and some other business hardware like PoS.

They sold their laptop and PC division to lenovo a long time ago.

Seems that HP is going the same root: selling PC and laptop divisions, and keeping server, printer and business solutions.


RE: What?
By BSMonitor on 8/19/2011 8:36:34 AM , Rating: 2
There is HUGE difference between SELLING a part of your business and spinning off a separate holding company. IBM did the latter. Lenovo was not anything but a tax shelter for IBM before 2003. And when the PC business became cutthroat, dumped it for the same reason HP is. It hurts bottom line and gross margins.

Another example is AMD and Globalfoundries. "Sell" the weaker part of your business in order to avoid investors seeing the unprofitable side.


RE: What?
By sviola on 8/18/2011 5:56:33 PM , Rating: 2
Well, HP is IBM's biggest competitor. Both in software and consulting, though they don't have a DB Server, they sell Oracle and Microsoft solutions.


RE: What?
By tw33kerloki on 8/18/2011 6:43:26 PM , Rating: 2
At least AT brought back the super-hot HP-girl!


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