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Paul Otellini, chief executive officer of Intel Corp., said in an interview that he hoped Hewlett-Packard would keep its personal systems group (PSG) and will neither spin it off or sell to a third party. According to the head of the semiconductor giant, eventually the importance of PCs will only grow and one day computers will replace paper and will thus succeed HP’s print and ink businesses.

“I don’t know what decision Meg and the board will make now; I hope they decide to stay in the business. I think, when you think about their business, print and ink is such an important part of HP. And over time, all of us are printing less stuff, more and more we are living with digital images. To leave consumer digital electronics to me would be a very strange decision to make when your whole business model is tied up in imaging,” said Paul Otellini, in an interview with Fox Business Network.

Mr. Otellini has talked to HP’s newly installed chief executive Meg Whitman by phone and plans to meet with her on Friday.

For Intel, it is important that HP remains a strong supplier of PCs and servers. Hewlett-Packard is not only the world’s largest PC vendor and Intel’s customer, but a key Intel’s partner on the market of servers. HP sells various server systems based on Intel Xeon microprocessor as well as builds business-critical systems with Intel Itanium processors. As a result, it is crucial for Intel that HP retains its computer strength.

Recent rumours claim that HP is rethinking its plan to spin off its personal-computer division, as fresh analyses show the costs might outweigh the benefits, according to people familiar with the matter. In particular, separating the PC division would substantially weaken HP's buying power with component manufacturers because HP would lose economies of scale. It could complicate HP's supply chain and decrease profit margins on some products, the analyses suggest.

Tags: Intel, HP, Hewlett-Packard, Business

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