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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!


this is very unsettling
By Totally on 8/18/2011 5:16:01 PM , Rating: 2
I really like their monitors.




RE: this is very unsettling
By FITCamaro on 8/18/11, Rating: 0
RE: this is very unsettling
By spread on 8/18/2011 6:34:42 PM , Rating: 2
I really like their rebranding.

Wait, no I don't. They're cheap and flimsy and overpriced for cheap and flimsy.


RE: this is very unsettling
By CK804 on 8/18/2011 7:29:37 PM , Rating: 3
There's nothing cheap or flimsy about my ZR24W or LP2065.


RE: this is very unsettling
By Totally on 8/18/2011 7:32:11 PM , Rating: 2
+1 for the record, ZR24W I own 2


RE: this is very unsettling
By Taft12 on 8/19/2011 11:31:45 AM , Rating: 2
Please discover their business lines.


Focus on their software?
By goodsyntax on 8/19/2011 8:31:01 AM , Rating: 2
Uh, have they ever actually used their own software?

Their drivers and other software is horrible! The only software that actually works are the ones that they rebrand from other companies!




RE: Focus on their software?
By Taft12 on 8/19/2011 11:34:46 AM , Rating: 2
You don't even NEED to install drivers for their real printers. You need to buy a printer that costs more than $99.

The bloated drivers are full of junk to sell you online photo printing and various other useless crap. Sort of like the trial AV software preinstalled on your $399 PC. It's how they can sell the stuff so cheap.


RE: Focus on their software?
By mindless1 on 8/19/2011 3:30:06 PM , Rating: 3
Not sure what makes you state that. Either a printer has only minimal functionality using a driver integrated into the OS, or with any modern printer you need to install a driver, including networked printers, including anything over $99.

The drivers aren't bloated, it's the helper apps that are which you can disable as they are not needed.

They can sell "cheap" because like most of the competitors they make back the money on ink and toner, and to a larger extent today the other replacement parts as they break. Used to be you could get a printer that only took up 3 cubic feet of desk space and had 15K to 30K page cartridges. Today it's more like 6K, 10K at most and you can't even pick the things up except in certain locations as the flimsy frame will bend.


RE: Focus on their software?
By mindless1 on 8/24/2011 1:31:57 PM , Rating: 2
Oops, below "took up 3 cubic feet of desk space" should have read "took up 3 SQUARE feet of desk space" (or about 5 to 6 cubic feet).


Voodoo
By Sazabi19 on 8/19/2011 9:19:05 AM , Rating: 2
These idiots took over VoodooPC which WAS a boutique gaming computer maker (like Alienware still is but now under Dell) that made very nice high end (very pricey too, but competitive with other boutique) machines. When HP bought them out they had 3 units in production I remember, their desktop system, a laptop, and a small form factor pc with an external power source. Once HP got their hands on it they killed off the desktop and laptop and now they have just the little tiny underpowered machine for a waaay too high outrageous price. HP tried the gaming computer thing once, their Blackbird failed hard and was also too pricey. When you look at a gaming machine and go whoa, this thing is expensive, I'll go back to Alienware, you know it’s expensive. HP ruins everything they touch. They should stick with making mediocre machines for the mass consumers.




RE: Voodoo
By Taft12 on 8/19/2011 11:35:56 AM , Rating: 2
That Voodoo acquisition resulted in the HP Envy laptop line which was great, but I don't know if it still exists.


RE: Voodoo
By Sazabi19 on 8/19/2011 3:00:24 PM , Rating: 2
Envy was the fruit of Voodoo. They had Envy (laptop), Omen (desktop) and i forgot the name of the small one just this minute but the point is that HP just took it from Voodoo and slapped their logo onto it, no new dev or anything.


By DOShepherd on 8/18/2011 7:04:24 PM , Rating: 1
I just received an email promoting the "NEW! HP TouchPad with webOS WiFi 16GB $399 WiFi 32GB $499"
Did HP forget to inform marketing???
David
http://hitechbrew.com




By idiot77 on 8/18/2011 9:09:27 PM , Rating: 2
So when does yours get delivered?


By kleinma on 8/18/2011 10:19:13 PM , Rating: 1
Shit, if they are trying to unload these things for something like $199, i would probably buy it just to use as a browser. Right now I have a droidx and a laptop. Don't really need a tablet right now, but if the price drops far enough on remaining stock, it could be a decent buy.


Wake up Google
By wordsworm on 8/19/2011 3:09:26 AM , Rating: 2
Forget about Motorolla, and get some of HP's Palm IP. Hell, they could probably buy the whole hardware division and start putting their own brand on their own hardware.




RE: Wake up Google
By Chadder007 on 8/19/2011 9:51:17 AM , Rating: 2
Werd. I would love to see WebOS's cards system implemented on Android.


It was a long time coming
By thisisaname on 8/19/2011 2:22:37 PM , Rating: 2
I don't know how HP has managed to be the number one computer maker in the world, with their lackluster customer service combined with cheap quality, but overpriced, throw-away computers. I'm glad to see them go, only hope Dell follows suit.
Burn HP burn!!




RE: It was a long time coming
By mindless1 on 8/24/2011 1:37:58 PM , Rating: 2
I know how. Lower initial purchase price.

Customer service, (un-)cheap quality, and non-throw away computers (just which computer isn't considered throw away, anyway except one so obscenely priced that service and replacement parts exceed the value of the used system right after the warranty ends?) all reduce overhead so the system can sell for lower cost.

Number one isn't about making what you, or I, consider the "best" product, only what more people consider the best value.


Itanium is next
By dgingeri on 8/18/2011 6:32:05 PM , Rating: 2
They'd better just dump their lagging Itanium servers as well. They're losing that race badly. Better for them to just give up.




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.




Time to buy... ?
By rburnham on 8/19/2011 3:18:01 PM , Rating: 2
I tend to look to HP for reasonably priced Windows laptops. They seem to be one of the few laptop makers out there that are actively supporting AMD CPUs. Not anymore I guess. Oh well.




WebOS = Kin
By lawrance on 8/24/2011 11:38:56 AM , Rating: 2
Wow that was fast. Reminds me of the Kin axe!




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