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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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Perception of brand name
By Aibo on 8/19/2011 12:41:01 AM , Rating: 2
Look at the history of computer based companies. We used to have so many brands to choose from. Then, larger ones don't like the competitors and bought them. It's more often after they bought the companies, they try to integrate both companies products but eventually failed to get any where.

As long the PC consumers only care only care about paying the least possible, companies after companies will continue phase out. The way I see if eventually there will be only one PC brand maker left and the rest are all "clone" brands.

Apple like it or not did the right thing. Control the brand name tightly. They are able to price their products at higher price because they have successfully created a premium brand name. Apple consumers are willing to pay more for Apple products because they feel like Apple brand is the premium quality (true or not, doesn't matter). It's all about perception on the brand name.

Different PC brands tried but none is able to reach the Apple brand name level. It's because when another PC brand compete with lower price, other PC brands also have to drop the price. Next thing is all the PC brands are dying from making no profit because none ensures their brand name is perceived as premium quality.




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