HP spin off PC business

Hewlett-Packard Co., the world’s largest personal-computer maker, confirmed its decision to spin off its PC business and even more shocking: it is going to “discontinue operations for webOS devices”. In other words, this is the end of the line for its just-launched tablet, the HP TouchPad as well as for its  smartphones that challenged Apple Inc.’s iPad and iPhone. This is a drastic change from past strategies and it will undo the famous HP-Compaq merger that was engineered by then-CEO Carly Fiorina a decade ago.

At the same time HP announced its spinoff plan, it agreed to buy U.K. software firm Autonomy Corp. for about $10.25 billion, seeking to move further into the higher-profit business of analyzing data for corporations. This plan also marks the second time the company has looked to divest a core business to keep up with the changing tech industry. Just to remind that in 1999 HP spun off its measurement-device unit-which included technologies that were the genesis of the company and core to its success-into a firm known as Agilent Technologies Inc.

The main reason for Leo Apotheker, HP Chief Executive since November, to consider the decision of getting out of the computer business the best possible choice, are the low margins and low growth in PC business the company is facing. Mr. Apotheker strongly believes that the company can invest its capital in better places in order to improve its overall profit margins, even though it may cut the company’s revenue by roughly a third. His goal is to reposition HP into an enterprise business and move away from consumer products. Over the past few month it became clear that the only way Mr. Apotheker to achieve this goal is to add software products for business and to find a way to get rid of the company’s PC arm and use the cash to buy into these  new areas.

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