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HP announces shock PC pull out plans

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19th Aug 2011
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Hewlett-Packard (HP), the largest producer of PCs in the world, has dramatically announced plans to sell part or all of its Personal Systems Group (PSG) – which includes its tablet PCs and laptops – as it reveals plans to “fundamentally transform” the company.

The PSG generated turnover in excess of $41bn in the 2010 fiscal year, though in its latest financial statements, HP said the group has seen a year-on-year drop in in turnover by 3% - with its consumer client results shrinking by as much as 17%. Despite this, HP confirmed PSG remained the PC market leader in terms of units, revenue and profit share.

HP also revealed the PSG had the lowest operating margin of any of its business units, at just 5.9%. By comparison, HP Enterprise Services’ operating margin stands at 13.5%, with HP Software, Enterprise servers and networking, and the Imaging and Printing Group enjoying margins of 19.4%, 13%, and 14.7% respectively.

In 2010, HP acquired Palm for $1.2bn and subsequently launched TouchPad tablet devices powered by Palm’s webOS platform. The products have however failed to gain traction in the face of market domination by Apple’s iPad and Android-powered tablets. HP confirmed it would be looking at ways in which to “optimise” the webOS platform under its current plans.

Nearly 10 years ago, HP acquired Compaq - then the largest PC supplier - for $25bn.

“PSG is a world-class scale business with a leading market share position and a highly effective supply chain and broad reach and go-to-market capabilities,” said HP CEO and president, Leo Apotheker. “We believe there are alternatives that could afford PSG more autonomy and flexibility to make strategic investment decisions to better position the business for its customers, partners and employees.”

The potential sell off of HP’s PC division mirrors similar moves made by IBM, which in 2005 sold its personal computer unit, which included the ThinkPad brand, to Lenovo. IBM’s decision formed part of its own business transformation strategy, which has focused on IT services, software, and analytics in recent years.

As well as announcing its plans for PSG and business transformation, HP has also confirmed it is to acquire the UK firm, Autonomy for £7.1bn. The Cambridge-based company is a specialist in unstructured data analytics, which HP claimed will enable it to “reinvent the business analytics software and services space”. The company also claimed the acquisition of Autonomy will bolster its Cloud Computing offerings in both information management and data analytics, as well as complement its other business units, such as enterprise servers, storage, networking, services, and software.

Speaking about Autonomy’s acquisition, Apotheker – the former head of software giant SAP – said the company represented HP with an opportunity to accelerate its strategic vision: “Together with Autonomy, we plan to reinvent how both unstructured and structured data is processed, analysed, optimized, automated and protected. Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix. We believe this bold action will squarely position HP in software and information to create the next-generation Information Platform, and thereby, create significant value for our shareholders.”

HP also said the acquisition would enable its Imaging and Printing Group to accelerate the unit’s enterprise strategy to continue growing content and document management.

HP’s announcement regarding the future of PSG, its acquisition of Autonomy, and the transformation of the company, has been bolstered further with the appointment of John Visentin as head of HP Enterprise Services. A former executive at IBM, Visentin has spent over 25 years in IT, and has held responsibility for whole business units, as well as brand recognition in the IT services industry – one of the key areas HP is now concentrating upon.

The future of PSG is expected to be resolved within the next 18 months, according to a statement from HP, which also confirmed the company will not disclose any developments regarding PSG “until such time as the HP board of directors approves or completes a transaction or otherwise determines that further disclosure is appropriate”.

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