Last updated: October 28, 2011 12:02 am

HP reverses decision to spin off PC arm

Hewlett-Packard will keep its personal computer division rather than spin it off to shareholders, as its then chief executive, Léo Apotheker, had proposed before he was ousted last month.

Mr Apotheker’s successor as chief executive, Meg Whitman, said on Thursday that the biggest PC maker by revenue had studied the issue and found that the benefits of separation were outweighed by factors including the price advantages HP enjoys as a large buyer of computer components.

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“This was first and foremost a math exercise, and a very revealing one,” Ms Whitman told the Financial Times. “I also took into account the distraction that a spin-off would be. We need to focus on excellence now.”

She said she had heard from customers who wanted HP to retain the division, which turns a modest profit on more than $40bn in sales. Ms Whitman had hinted that she and the HP board were likely to come to that conclusion. On Thursday, she said the decision was hers but that the board, which has been badly divided on many issues for years, gave unanimous approval.

Ms Whitman also said she was not considering whether to reverse another controversial decision by Mr Apotheker, to stop producing tablets and smartphones using HP’s webOS touch-based operating system.

Instead, she said her next big decision involved what else to do with that software. She and Todd Bradley, PC division chief, said the possibilities included using it in other HP hardware, selling it off or licensing it to outside manufacturers. “Todd and I are committed to alternative devices, such as tablets and ultra-thin notebooks,” Ms Whitman said.

Mr Apotheker’s August announcement that the company would study the merits and probably jettison the PC division angered investors and was one of the main reasons for his exit.

The company’s about-face removes the largest uncertainty about its future and ensures it will continue to have the maximum clout when it bargains for components that go into both PCs and servers. It will also maintain a main entryway for selling other gear to business customers.

Finally, the move will help the PC business retain employees and shore up its sales to companies, which anecdotal evidence suggested were in jeopardy because of concerns about service and product development.

“A quick decision on the outcome was a good move,” said Gartner analyst Mark Fabbi, who had previously recommended that clients weigh the risks before buying their first personal computers.

Among the reasons Mr Apotheker cited for a spin-off was the pressure from Apple and its hit iPad tablet. An independent company could move more quickly, he said.

Such challenges will make growth difficult, analysts said. “They need to move faster”, said Shaw Wu, and analyst at Sterne Agee. “They may do Android tablets, but even that is not an automatic recipe for success.”

Also, on Thursday, shares in Advanced Micro Devices, the PC chipmaker, rose 8 per cent in after-hours trading on news that the company had surpassed analysts’ expectations on revenue and earnings for the third quarter. Net income was $97m, compared to a $118m loss in the same quarter last year. Revenue rose to $1.69bn from $1.62bn the year before.

Additional reporting by Richard Waters

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