HP (Hewlett-Packard Co.) has decided to ditch the PC and Tablet business, and instead focus on Enterprise and Corporate software and services.
The company has been the biggest seller in the world of desktop and laptop computers, and on August 18th said that it was considering spinning off its PC operations and that it will exit the smartphones and TouchPad tablet computer businesses.
HP also agreed to buy a major British business software firm for $10.3 billion in cash, to help it in it’s new corporate software focus .
The new HP business plan is a great remaking of one of Silicon Valley’s most illustrious technology companies, as it seeks to move away from the sagging personal computer business and toward the more vibrant and stable market for corporate software.
It is clear that HP will include cloud computing services, remote data centers that businesses and government agencies can use to store data and computer programs they run remotely. In effect, the new plan is to turn HP from a hardware product company, to a software services company.
“Most of all, today’s about transforming HP for the future,” Chief Executive Leo Apothecker said Thursday. “HP is at a critical point in its existence, and these changes are fundamental to the success we all want as shareholders, investors and customers.”
HP is still going strong, as the company’s fiscal third quarter ( ended July 31), results were slightly ahead of Wall Street expectations: Profit increased 5.5% and sales edged 1.3% higher.
“Wall Street likes certainty, and HP is going to have a lot of moving parts now,” said analyst William Kreher of Edward Jones and Co. “This is a massive transformation from a hardware company to a software and services firm. There’s going to be a significant disruption in many of their major businesses.”
So why is HP changing directions now? Well, this is in part due to the fact that HP has seen increasingly weak growth in its PC business in recent years as it’s global computer shipments grew only 3% in the second quarter; reflecting a general slowdown as consumers opted to purchase smartphones and tablets rather than desktops and laptops, according to the latest figures from research firm IDC.
HP’s Personal Systems Group, which is it’s the PC operation, accounted for $9.6 billion, or about 30%, of HP’s revenue for the third quarter.
The company said a spinoff was one of the alternatives it was considering for the future of its personal computer business.
The company had high hopes for its TouchPad tablets as a rival to Apple Inc.’s iPad and for its smartphones, both based on the WebOS software that the company picked up in acquiring Palm Inc. last year. But neither the tablet nor such phones as the Palm Pri, Pixi and Veer have caught on with consumers.
As to what will eventually become of HP’s computer group, it may be sold off like IBM did with it’s Laptop division, or they may just shut it down – who knows, but the future of one of America’s greatest companies will never be the same.