Published in AI

HP to sell off its Personal system group

by on22 August 2011

Low margin to blame
You may recall that Motorola decided to spin off and sell its mobility group to Google, and now, just a week after HP killed off its web OS tablet and phone OS, the latter is preparing to spin off the Personal system group.

HP CEO, Leo Apotheker believes that spinning off and selling Personal system group is the best option for HP to continue a healthy growth in higher margin area. Personal system group apparently has operated in lower margin segment.

With the buyout of Autonomy Corp a software company, HP hopes to become software and services company without any reliance on hardware business. Autonomy has specialized in providing unstructured data analytics and data management software and has customers such as Coca Cola, Nestle SA and even the U.S. Securities and Exchange Commission.

This is a big market as companies spend a $20 billion enterprise information management space and $55 billion business analytics software and services space. Since the margins are high, 87% gross margins and 43% operating margins in calendar year 2010, the 10.3 billion investments starts to look as a good one.

This decision is definitely a second major earthquake in the computer industry as HP had a major market share in notebooks, currently the most popular computer segment, and it still does quite good with servers and desktop. Let me remind you that IBM has made a similar decision back in 2005 and sold off its PC group to Lenovo so it won’t be surprising that someone will pick up HP group and continue selling computers.

WebOS clearly lost the battle to Apple iPad OS and Android tablet OS, but our personal opinion is that HP has given up too easy. The big question remains who will be the company to pick up the HP’s Personal system group.

After the announcement that Personal system group will get spun off and that WebOS will meet its maker, HP’s stock fell from $32.49 on Thursday to $23.45 in aftermarket trading. Stock owners were selling as much as 8 million stocks after the announcements and a few times more than 4 million through Thursday and Friday. You can tell that people are concerned, but HP will probably continue to be a very strong player. However,  it won't be selling many tablets or PC’s in the future, at least not under the HPQ brand.

You can find more here.

Last modified on 22 August 2011
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