Editor’s note: Ezra Gottheil is senior analyst with Technology Business Research.
HAMPTON, N.H. – The smallest surprise: HP (NYSE: HPQ) will keep its PC division
HP announced Thursday that it no longer plans to spin off its PC division, the Personal Systems Group (PSG). Technology Business Research believes that, given customers’ clear desires to work with a single HP, the decision was the most likely outcome. Word that HP might spin off PSG, the world’s largest PC provider, drew widespread criticism and risked alienating customers.
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.
When HP announced that it was considering spinning off PSG, many customers were disturbed. TBR research showed that some customers started to give greater consideration to other vendors, not only for PCs, but also for servers and services.
Customers found HP less predictable and less reliable, which is not good for a strategic technology partner. TBR believes HP partners also were concerned. Many customers and partners had preferred HP for its one-stop shopping, and now a key offering was perhaps being withdrawn.
Less than a month after the announcement of the potential spinoff, Apotheker was replaced by Meg Whitman, revenue guidance was revised downward, and HP committed to a rapid decision on PSG. The reduced revenue forecasts showed that customer concern translated into action. Today, less than a month later, the expected announcement was made.
TBR believe HP’s customers will come once again to trust solid reliable HP, but that it will take time. Thursday’s announcement is the first step.
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