HP's new chief executive Meg Whitman has abandoned a proposal to spin off the company's market-leading personal-computer unit, taking a step toward unwinding the moves of her predecessor.
In her first major move since taking over on September 22nd, Ms Whitman backed away from a proposition made by Leo Apotheker a month before he was fired. She said in an interview she may also resurrect a push into tablet computers, an effort that languished under the former CEO, and in another break with the past, Ms Whitman is sharing management with Chairman Ray Lane.
"HP has been a comedy of errors, and selling a third of their revenue right now is probably not sound," said Brian Marshall, an analyst at ISI Group in San Francisco. "This is obviously a pretty big reversal of the strategy Leo put into place."
HP follows Netflix, another Silicon Valley technology company, in changing tack on policies that displeased investors. Netflix abandoned a plan this month to split into two businesses, a move that would have made subscribers choose between different services for DVDs and streaming video.
Ms Whitman is keeping PCs to maintain a diverse product lineup and to help Hewlett-Packard drive bigger bargains when purchasing components. Her aim is to step up growth and avoid the management missteps that rankled shareholders and led the company to cut sales forecasts three times under Apotheker.
The decision on PCs followed a review that found Hewlett- Packard's role as the largest PC seller was too valuable to its brand, procurement power and customer relationships, the company said yesterday.
"If you try to hive a division off, it's really hard because you almost have to recreate the whole thing," Ms Whitman said in the interview.
Offloading the division also would have rung up $1.5 billion in one-time expenses and $1 billion a year in ongoing costs related to replicating functions, Ms Whitman said. And the spun-off company might have ended up competing with its parent in servers and other markets, she said.
Holding on to PCs affords the company purchasing advantages, giving it the clout to negotiate better prices for chips and hard drives, which are used in both PCs and servers. That's especially useful with memory chips, given their volatile prices, said Richard Shim, an analyst at market research firm DisplaySearch, part of NPD Group.
"If you can ensure a certain volume then you can get a consistent price; it's like jet fuel to airlines," he said. Computer companies also benefit from packaging PCs, servers and other gear in the same sale, Mr Shim said.
While Ms Whitman has taken charge of computer hardware and corporate functions, Mr Lane is focused on software and technology services, she said. That lets the executives "cover more ground", Ms Whitman said.
When Ms Whitman agreed to become HP's CEO in September, it was on the condition that Mr Lane be executive chairman, according to a person close to the company. The two executives compare notes on a daily basis and
hold a more detailed meeting once a week, Ms Whitman said yesterday.
Mr Apotheker was ousted a month after announcing the spinoff idea, dogged by a slump that forced him to cut sales forecasts three times in less than a year.
He also undermined investors' confidence with a $10.3 billion agreement to buy software company Autonomy Corp, announced the same day as the PC group review, and by killing the company's TouchPad tablet computer less than two months after its high-profile debut.
Bloomberg
