HP’s market share drops; plans to spin of PSG

The competition in the smart devices market seems to be heating up, and top players are trying various strategies to maintain their position, in an extremely fragmented market.

Days after Google’s take-over of Motorola Mobility, HP has decided to spin off its Personal System Group. Alternatives being considered include a full or partial separation of PSG from HP through a spin-off or other transaction. This process could be completed within 12-18 months.

PSG is the leading manufacturer of personal computers in the world and had annual revenues of approximately $41 billion in fiscal year 2010. PSG enjoys leading global market positions in consumer and commercial PCs. To compete with a fast expanding PC market, HP feels that finding alternatives to PSG, will help it adapt to current market forces.

HP is implementing a plan to fundamentally transform the company. An important component of the plan is focusing its investments, resources and management attention to drive higher value solutions to enterprise, small and midsize business and public sector customers. HP believes that the exploration of alternatives for PSG will help the company accomplish its strategic goals and pursue profitable growth and enhanced shareholder value. A post-transaction HP would continue to help its customers manage the information explosion and address their most critical needs through a portfolio that spans printing, software, services, servers, storage and networking,” according to a press release from HP.

HP also plans to discontinue operations for its webOS devices, specifically the TouchPad and webOS phones, and will explore options to optimize the value of the webOS software, that is based on Palm technology- a company that it acquired last year. This news comes shortly after a new tablet based on the Palm webOS platform was announced, which has been met with low sales, despite the company slashing its post-launch price.

HP plans to acquire Autonomy, a UK-based company that makes database search software for the enterprise market for a sum of US$ 10 billion.

In March we outlined a strategy for HP, built on cloud, solutions and software to address the changing requirements of our customers, shaped heavily by secular market trends that are redefining how technology is consumed and deployed. Since then, we have observed the acceleration of these market trends, which has led us to evaluate additional steps to transform HP to meet emerging opportunities. We believe the acquisition of Autonomy, combined with the exploration of alternatives for PSG, would allow HP to more effectively compete and better execute its focused strategy,” said Leo Apotheker, president & CEO, HP.

HP has three main business groups – Personal Systems Group (PSG) – which is responsible for PCs, mobile devices and workstations, Imaging and Printing Group – which is responsible for inkjet, LaserJet and commercial printing, printing supplies, and Enterprise Business – which has products that include storage and servers, enterprise services, software and networking.


While it is unclear whether any of these groups would be merged with another, there was earlier a plan by the company to integrate Palm’s webOS into every HP personal computer shipping next year.  

Globally, HP’s tablets and smart devices that run on the Palm OS are rated fourth or fifth in terms of customer adoption, after Apple’s iOS, Android and Symbian OS.

Reacting to the announcement by HP, Carter Lusher, research fellow, Ovum, said, While the divestiture of the Personal Systems Group (PSG) might make strategic sense -after all IBM sold its PC Division in late 2004 with minimal negative impact – in the short run this move could impact HP’s credibility as a predictable strategic IT supplier.”


That is because it was only on March 15, 2011 Рa scant five months ago Рat the HP Analyst Summit that CEO L̩o Apotheker re-confirmed the strategic importance of PCs to HP. For enterprise and public sector IT executives, predictability is a critical trait for major technology vendors and HP continues to reinforce the impression that it is unpredictable.


HP’s plan to spin off the PSG will have ripple effects far beyond the products in PSG, some of which can be anticipated while others cannot. Areas that will be impacted include the overall supply chain that also feeds the enterprise server, storage and networking products; partner ecosystem; commitment to countries and regions; enterprise services, and strategic customer relationships.


“Ovum recommends that enterprise and public sector IT managers use this period of disruption at HP as an opportunity to drive hard bargains in product and services procurement projects. HP is going to need to every dollar, euro, yen, pound, and yuans to offset the drop in sales that come with uncertainty that naturally follows announcements like the PC division divestiture, Enterprise Services shake up, and major software acquisition of Autonomy.”

By Beryl M

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