HP to Rethink PC Spin-Off Plan - Report

HP's PC Unit Likely to Remain In House

by Anton Shilov
10/18/2011 | 10:25 AM

A new report citing sources with knowledge of proceeding inside Hewlett-Packard suggests that the board of directors and Meg Whitman will cancel plans to spin-off the personal systems group. Apparently, new analysis reportedly shows inefficiencies in the PC business unit spinoff plan.

 

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, reports the Wall Street Journal. 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.

"If you lose purchasing power and other advantages, then a spinoff isn't worth it," one of the sources reportedly said.

 

Nonetheless, neither the newly installed chief executive Mr. Whitman nor the company's board have made a final decision yet. Publicly it was revealed that she would like to make a decision by the end of October.

What should be kept in mind is that nowadays successful PC companies should also offer portable devices like smartphones and media tablets, hence, the PC and the Palm units are generally indivisible. However, HP has discontinued all Palm's products and shut down retail stores. The company is in process of selling off the Palm/webOS unit. Naturally, HP lacks a number of things to build its own eco-system around PCs, smartphones, tablets  and other electronics so to compete against companies like Apple head-to-head. But its overall product portfolio points to potential success of the PSG.

HP did not comment on the news-story.