HP wont spin off personal computer unit

Written by Reuters | San Francisco | Updated: Oct 29 2011, 07:48am hrs
Hewlett-Packard ditched a plan to spin off its personal computers unit, a month after the ouster of CEO Leo Apotheker whose idea would have cost billions of dollars in expenses and lost business.

New chief executive Meg Whitman, who replaced Apotheker, had vowed a quick decision on an issue that was beginning to alienate its PC partners, investors and customers.

Whitman still has one unresolved item before her the future of WebOS software. Apotheker put the WebOS division in jeopardy after he killed the WebOS-based TouchPad tablet following poor sales.

HP is still mulling the softwares future, including if it should build a new WebOS-based tablet, Whitman said in an interview.

The question now before us is what do we do with WebOS software and do we come back to market with WebOS devices, Whitman said. It obviously will not be the same device but it will be version 2.0.

The former California gubernatorial candidate said that she decided to retain the PC group as the numbers were incredibly compelling.

Separating the PC unit would have cost the company $1.5 billion in one-time expenses and another $1 billion annually, it said.

The retention of the PC business marks the latest flip-flop in strategy as the company had said earlier that its preferred option was to spin out the business.

This is the most pragmatic decision and allows them to continue to leverage the end-to-end supply chain benefits, said Gartner analyst Mark Fabi, adding that it also showed Whitmans decisiveness as CEO.

Clearly this was missing over the past year, he added.

The worlds largest technology company by revenue stunned investors when it announced in August that it was considering strategic alternatives for its Personal Systems Group (PSG) which includes PCs and would kill its new tablet computer as part of a major revamping away from the consumer market.

The Palo Alto, California company has been struggling in the PC market a low-margin but high revenue business as niftier gadgets such as Apple Incs iPad have lured consumers away. Citing deep integration of the PC group in HPs supply chain and procurement, Whitman said the company was stronger with the unit.