Stephen Foley: Now Hewlett-Packard has decided it will not divest, it must decide that it will invest
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Saturday 29 October 2011
US Outlook: The "data-driven evaluation" to which Hewlett-Packard has belatedly subjected the proposed spin-off of its personal computer business, probably did not need to go further than measuring the share-price decline on the day it was announced. It was 20 per cent.
New HP chief executive Meg Whitman (who was a non-executive when the board sanctioned the spin-off of the Personal Systems Group) says the evaluation "clearly" shows that PCs add value to the business overall and should be kept within the company. "The 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."
So there you have it. The idea that everyone signed up to nine weeks ago has been comprehensively trashed. One wonders what kind of evaluation the board did in August, if it wasn't data-driven, but hey ho. Best only to look forward now.
The reasons why the board and its now-departed chief executive Leo Apotheker were tempted to rip the PC business out of HP are easy to identify. There is more profit opportunity over the long run in other areas of its business, from software to – increasingly – IT services. HP jealously eyes IBM's transition a decade ago from hardware to consulting (a successful transition, for which one of its architects, Ginni Rometty, was rewarded with the IBM chief executiveship this week), and it wants to follow suit.
As for the personal computer division, itself, it is a low-margin, commodity business at the best of times. HP has probably squeezed as much efficiency out of it as possible. As if recession-level consumer and business spending was not enough of a challenge, now it is under apparently mortal threat from gadgets such as tablets, just the kinds of electronic objects of desire that HP has a terrible track record developing.
It was disappointing, therefore, that Ms Whitman's swift and decisive decision to keep the PC division was not accompanied by a "data-driven evaluation" of how to improve it. Any battle plan will have to begin by recognising HP has been hobbled by years of under-investment under Mr Apotheker's predecessor, the also-sacked Mark Hurd.
HP went up an operational cul-de-sac by trying to launch tablet computers based on the WebOS software it acquired with Palm, but it need not give up on the market entirely, particularly since laptops are likely to become more "tablet-like" and tablets may well morph into something with as much functionality as a PC.
Ms Whitman has plenty of opportunity to catch up. Having now decided to keep the division, she must.
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