by Anton Shilov
10/27/2011 | 02:39 PM
Hewlett-Packard on Thursday said that it has completed its evaluation of strategic alternatives for its personal systems group (PSG) and has decided the unit will remain part of the company. The decision means that the company will continue to develop itself consistently while retaining its biggest strength, the PC unit.
“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees. HP is committed to PSG, and together we are stronger,” said Meg Whitman, HP president and chief executive officer.
The strategic review involved subject matter experts from across the businesses and functions. The data-driven evaluation revealed the depth of the integration that has occurred across key operations such as supply chain, IT and procurement. It also detailed the significant extent to which PSG contributes to HP’s solutions portfolio and overall brand value. Finally, it also showed that the cost to recreate these in a standalone company outweighed any benefits of separation.
“Despite being a commodity business, with a lower profit margin than most of its other businesses, PCs benefit HP greatly. TBR believes that HP’s PCs help drive the business across most of its product lines, from printers to servers to services. They create scale for the manufacture of other hardware, they fill out the portfolio for partners, and they provide entry points for the rest of HP’s sales force,” said Ezra Gottheil, an analyst with Technology Business Research (TBR).
The outcome of this exercise reaffirms HP’s model and the value for its customers and shareholders. PSG is a key component of HP’s strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers. The HP board of directors is confident that PSG can drive profitable growth as part of the larger entity and accelerate solutions from other parts of HP’s business.
When HP announced that it was considering spinning off PSG, many customers were disturbed and started to give greater consideration to other vendors, not only for PCs, but also for servers and services. Many customers and partners had preferred HP for its one-stop shopping, and now a key offering was perhaps being withdrawn, TBR believes. Less than a month after the announcement of the potential spinoff, chief executive Leo Apotheker was replaced by Meg Whitman, revenue guidance was revised downward, and HP committed to a rapid decision on PSG, which it made: PSG remains a part of HP.
PSG has a history of innovation and technological leadership as well as an established record of industry-leading profitability. It is the No. 1 manufacturer of personal computers in the world with revenues totaling $40.7 billion for fiscal year 2010.
“As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry’s broadest portfolio of PCs, workstations and more. We intend to make the leading PC business in the world even better,” said Todd Bradley, executive vice president of personal systems group at HP.