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August 24, 2011 6:45 pm
Léo Apotheker is confident that Hewlett-Packard’s personal computer business will continue operating as well as it has been, “if not better”, in spite of plans to spin off the $40bn-revenue unit from the parent company.
“It is bad news for our competitors, but HP’s PC business will be in existence for many years to come,” he told the Financial Times.
The chief executive of HP is keen to reassure investors, suppliers and customers, who have been alarmed about the effect of the move. The company has lost a quarter of its value since last week when it announced the plan to separate the PC unit at the same time as an $11bn deal to buy Autonomy, the UK software company.
HP stock has fallen so much, to the lowest price-to-earnings ratio of any big technology company, that some suggest it could become a takeover target itself.
Prospects of a buyer for the PC unit are dimmer, bankers said, and most likely it will be spun off to HP shareholders. Mr Apotheker is keen to convince them that this would give them holdings in two viable companies – a fast-growing enterprise software business and a steady PC business.
The PC business – still the world’s largest in terms of sales – is likely to continue to be run by current management.
In a separate interview, Todd Bradley, head of the unit, said HP would soon launch an advertising campaign to “clarify the vibrancy and capabilities of the business [in the] short-term, medium-term and long-term”.
He also said that the new ownership structure for his division would probably be completed in less time than the projected 12 to 18 months, which has been criticised by investors as overly long.
Consumers are migrating towards using mobile devices, with combined sales of smartphones and tablets expected to outstrip PC sales for the first time this year. HP has said it will cease making TouchPad tablets and Pre smartphones – these are now being sold at fire-sale prices.
But, far from believing the PC is dead, Mr Apotheker argued that an independent PC business would be able to react faster to consumer trends. “The PC business has to have the freedom to allocate capital as it decides. They are large enough to do this themselves,” Mr Apotheker said.
His main focus is with the remaining business, which will become tightly focused on providing software, services and some hardware to corporate clients. Software will account for 8 to 9 per cent of revenues by 2015, Mr Apotheker said.
The Autonomy acquisition is to be a cornerstone of this. Mr Apotheker aims to increase revenues by selling Autonomy software outside its current main markets of the UK and US, adding Autonomy’s document management software to its existing storage systems or to businesses such as healthcare processing. A large part of Autonomy’s business is providing cloud computing services, an area Mr Apotheker wants to grow at HP.
Keeping Mike Lynch, chief executive of Autonomy, sweet is crucial to the success of the merger, and Mr Apotheker plans to give him free reign.
“For the first year, Autonomy is going to be managed as Autonomy – in an autonomous way,” Mr Apotheker said. “Mike is an extraordinary human being and he is very excited about this project. We share the same view, the same ambition.”
Given that Mr Lynch, one of the few founder chief executives in the UK, will make $800m from the deal, many industry observers are concerned he will soon walk away from HP to start a new business.
“I feel totally happy about Mike’s commitment. He has committed to a significant period of time. It is years rather than a year,” Mr Apotheker said.
Mr Apotheker also said the company remained committed to its webOS operating system. Despite no longer making mobile devices, the company has plans to continue developing the software platform, which could become the independent competitor to Apple’s iOS and Google’s Android systems.
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