HP may quit PC business
Fri, 19 Aug 2011 9:59a.m.
In a dramatic reshuffling, Hewlett-Packard said Thursday that it will discontinue its tablet computer and smartphone products and may sell or spin off its PC division, bowing out of the consumer businesses.
It's one of the most extreme makeovers in the company's 72-year history and signals new CEO Leo Apotheker's most transparent move to date to make HP look more like longtime rival IBM, which now makes most of its money from software and services.
The most apparent result for consumers will be the end of HP's TouchPad tablet, a sales dud, and HP-branded smartphones, also-rans in a booming market crowded with the iPhone and devices based on Google's Android system. By the end of next year, HP computers could be sold under another company's name.
HP will continue to sell servers and other equipment to business customers, just as IBM now does.
It was not immediately known whether any jobs will be cut. HP employs more than 300,000 worldwide.
A decade ago, HP emerged from a bitter fight to spend more than US$24 billion on Compaq Computer, setting the stage for HP to become the world's No 1 maker of personal computers. Now, three CEOs later, HP is changing course - hard.
The PC division is HP's biggest revenue generator but least profitable division. The move has long been rumoured, but just six months ago HP dismissed reports of the possibility as "irresponsible reporting" and that PCs are "core to HP's strategy for the connected world".
The PC industry is under pressure from hot-selling smartphones and tablet computers, which have contributed to already weak consumer demand for PCs in the US and Europe.
More striking is that HP plans to shutter its fledgling smartphone and tablet business just two years after spending US$1.8 billion on smartphone maker Palm, which gave HP the webOS software that has been praised by critics but largely been ignored by the marketplace. It is here that HP was the victim of the Apple and Google juggernauts, as iPads and iPhones and smartphones running Google's Android software have been hot sellers, while HP devices have languished.
HP also announced that it is in talks to buy Autonomy Corp., a business software maker. Earlier, The Wall Street Journal and Bloomberg News had reported that HP planned to buy Autonomy for US$10 billion, which would rank the deal among HP's biggest.
The decision to buy Autonomy also marks a change of course for HP, one that makes HP's trajectory look remarkably similar to rival IBM's nearly a decade ago. IBM, a key player in building the PC market in the 1980s, sold its PC business in 2004 to focus on software and services, which aren't as labor- or component-intensive as building computer hardware.
HP, which is based in Palo Alto, Calif., also announced its latest quarterly results an hour earlier than planned.
HP's net income increased in the fiscal third quarter, which ended July 31, but its lower-than-expected outlook for the current period weighed on the stock.
The company earned 93 cents per share in the latest quarter. That's up from 75 cents per share a year earlier. Its adjusted earnings were US$1.10 per share, a penny above analyst expectations.
Revenue climbed less than 2 percent to US$31.2 billion, matching analysts' average expectations, according to FactSet.
For the current quarter, HP forecast adjusted earnings of US$1.12 to US$1.16 per share, below analysts' expectation of US$1.32 per share. Revenue should be US$32.1 billion to US$32.5 billion, short of analysts' estimate of US$34 billion.
HP also lowered its full-year revenue outlook. It now expects revenue of US$127.2 billion to US$127.6 billion, down from its previous estimate of US$129 billion to US$130 billion. Analysts were predicting US$129.1 billion in revenue.
HP's stock fell US$1.88, or 6 percent, to close Thursday at US$29.51. The stock fell further in extended trading to US$28.79, a drop of 72 cents, or 2.4 percent. The announcement came about an hour before the close of market.
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2/09/2011 9:21:14 p.m.
In 1999 or 2000, IBM pulled out of the home PC market and HP stepped in with their Pavilion range. It became apparent, as an employee of the company, that there would be little profit in this market. The cost of the monthly phone bill for the 0800 support call-centre based in Australia alone, was scary enough. It did not take long to get a replacement call-centre put into Auckland. In reality, a desktop computer for an office, is just a 'foot in the door' for sales of other high end systems or servers or printers, as long as the computers are of a good quality that earns the respect of the customer/manager. Once a computer is sold, there is no income from it. Compare with a printer that has consumables like ink or toner and paper. The printer business makes almost half, if not slightly over half of H.P's profits. In my opinion as an ex HPer, I think the CEO has made a smart business decision. It might be time for HP to look at the garage where Bill and David started making instruments and begin finding out what it is that the customer wants and build it.
19/08/2011 9:47:03 p.m.
Commenter Number 2 wrote:
They can't be serious.
Their tablets weren't successful but they are no doubt making loads of money on computers. Tablets may be becoming more common, but the computer is very far from death.
I don't know why you have to pull in random irrelevant things into the article though. The fact that HP the WebOS isn't doing well has absolutely nothing to do with leaving the computer business. You say their mobile devision isn't doing well, but why would it stop them from selling computers?
Why is it the most apparent result to consumers when their mobile products aren't doing very well?
19/08/2011 2:59:16 p.m.
HP hasn't had a clue where it is going for decades. It's all 'me too' - too late.
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