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HP’s Gigantic PC Footprint is Easily Their Biggest Strength

The decision to spin-off personal systems group (PSG) is strange for many reasons. But the main one is: what happens to HP - as a brand and as a company - when its personal computers vanish into oblivion? Will HP be able to be as competitive without PC unit (which size and footprint greatly helps to HP's economic strengths)?

X-bit labs: Why do you think HP is trying to spin-off or sell the PC unit? Which would be a better decision for the company in your opinion?

Rahul Sood: I think this is something for the current CEO to answer. My guess is he sees challenges internally in PSG, he doesn’t fully understand how the hardware business operates, and he feels that hardware margins are far too slim to bother with. In my opinion hardware is the footprint that makes HP who they are. HP’s gigantic PC footprint is easily their biggest strength, not their software and services. If HP could leverage their biggest strength in a meaningful way they’d be almost unstoppable.

HP Firebird with VoodooDNA

X-bit labs: HP's current line of products is pretty much archaic (which probably has its influence on margins). Besides, the company seems to have abandoned gaming business completely. What, do you think, HP should do: try to rebuild its product line and set up certain new business practices, sell PC business to someone capable of breathing new life into HP's PSG or spin it off so that to make it easier for PSG executives to make decisions?

Rahul Sood: Well, I don’t entirely agree with you on your first point, I think “archaic” is a bit harsh. HP has access to some of the best minds in the world, and they have access to the best technologies. In terms of design and style, HP has come a long way since 2006 – did you see their laptops back then? Of course they could be better; it has to do with priorities.

There are plenty of ways PC companies could create additional margin, not least of which is designing nice products – but more important is thinking beyond the device.

After HP spins off the PC business, it seems the printer & enterprise business will be left with a smoldering pile of leftover EDS + Autonomy, and some other stuff. They will cut off the majority of their consumer DNA, which is really counter to HP’s roots.

I personally don’t think this latest turn of events makes sense. Under the right circumstances, HP as a whole is worth more than the sum of its parts. If they could thoughtfully leverage parts across HP in a meaningful way and deliver beautiful experiences that invoke strong emotional connections with their customers then HP would be a much better company IMHO. Their market cap would go up – their P/E ratio would increase - there would be additional brand value in HP.

Just my opinion of course.

X-bit labs: Considering how little HP managed to do with Voodoo and webOS, maybe there is something fundamentally wrong with PSG?

Rahul Sood: Well, no company is perfect... but if your son had problems in school would you disown him? I think HP PSG has challenges. HP is the #1 PC Company in the world, and I believe they feel that being #1 is super important. Perhaps it’s an issue of priorities.

X-bit labs: If you were the chief executive at HP PSG. What would be the first three things you would do?

Rahul Sood:

1)      Bring back the values and innovative culture that Bill & Dave started decades ago.

2)      Cut out at least one layer of management.

3)      Elevate design and setup a creative team to bring creative design processes and thinking to the entire organization.

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