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HP explains quiting PC business

Reason for the sudden change of mind of the biggest PC player in the world – Evolution

The recent sudden decision of HP to put up its whole personal PC business for sell has come as more than just surprises for us. It does not only affect consumers, but also the equipment makers who have had a long-term relationship with the US computer giant. In fact there are several deals in place with a number of manufacturers in Taiwan. Could it be just the mere failure of one project called WebOS and a device called the HP Touchpad? Why the company was in such a hurry to pull the plug from an OS which it was extremely excited about just a couple of months ago? In fact we even started hearing rumors about the second Touchpad being in the pipeline!  

HP has been the biggest PC manufacturer in the world for many quarters. Its Personal system group that deal with the consumer PCs is the leading manufacturer in the world with about $41 billion in revenue last year. Surely it cannot be the failure of Touchpad alone.

Well, courtesy one of the press releases given by HP recently term this decision as an opportunity for the PSG to “position itself to address these rapid changes and maintain its technological and market leadership positions”. In simple terms, the evolution of tablets and advanced smartphones have been choking the laptop demand for long now, and HP might have believed it would not be interested in adapting to the new environment anymore – at least not after debacles of its smartphones earlier and now the tablets.

A similar strategy was adopted by IBM a few years ago, as a result of which the Thinkpad brand is now with Lenovo. Like IBM, HP also might see itself better positioned in terms of enterprise businesses ranging from servers to enterprise software packs. HP servers, storages and printers are highly placed in the competition, and the recent monstrous acquisition of European infrastructure software company Autonomy for as much as $10 billion expects to place the company high on the enterprise software platform market as well.

Easier said than done, the PSG won’t come cheap to whoever it interests, and HP expects a deal to be done in the next 12-18 months. For the company though, it was better to make the decision right now than to let the value go down to peanuts.

There is definitely more profit per sale in the enterprise business than in consumer products, and HP’s this move might actually let the computer giant remain concentrated on fewer bigger things.


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Pallab Jyotee Hazarika, 2011-08-21 (Update: 2012-05-26)