HP’s decision to keep PC division won’t undo a lot of damage

Can buyers really count on a commitment and support from HP?

It’s really not surprising that Hewlett-Packard has reversed an earlier decision to sell or spin off its PC division.

That decision, made under recently ousted chief executive Leo Apotheker, was greeted with a mixture of shock and skepticism when it was announced in August and arguably was the chief catalyst in Apotheker’s subsequent firing.

After all, HP is the world’s largest seller of PCs. The Personal Systems Group, responsible for the company’s PCs, tablets and smartphones, accounted for nearly 30% of HP’s revenues.

Yes, margins are low, and that’s been a drag on profit. In addition, PC shipments are dropping as more buyers opt for mobile devices.

But abandoning the PC division had other implications for HP’s business, as IDG News Service notes:

Some HP enterprise customers, including members of Connect, an independent HP's enterprise customer user community, wanted HP to retain the PC unit so they could go to one entity to purchase hardware, software and services. Some competitors like Dell preyed on the uncertainty around HP's business unit to gain new customers.

My guess is that Dell and other HP competitors will continue to benefit from HP’s obvious lack of a clear strategy and implied lack of commitment to PC buyers.

For an example, I can turn to myself. My 4½-year-old HP laptop pretty much died this week. I got a lot of use out of it – it was my main computer – but the end is nigh (which is why I’m typing this on a desktop unit, and not the Pavilion).

So I need to buy a new laptop. Guess what? I wouldn’t even think of buying an HP now. And not because I’m dissatisfied with the quality of my old laptop – though my computer repair guy doesn’t think much of HP products – but because I don’t trust the company to stick with the PC business.

Beyond that, it’s clear that HP is a mess. The same board that just said the company will keep the PC division signed off on Apotheker’s plan a couple of months ago. And then, the day after Apotheker was shown the door, new CEO Meg Whitman said HP would spin off the PSG by the end of this year, a decision she insisted was “solely based on the value to investors and value to customers.”

But on Thursday Whitman said the decision to keep PSG is "right for customers and partners, right for shareholders, and right for employees.” Glad we got that straightened out!

If HP’s painfully obvious dysfunctionality affects my PC buying decision, it stands to reason that many enterprise buyers – who have a lot more at stake in choosing the right computer vendor – will come to similar conclusions.

In announcing that it will keep the PC division, HP is trying to undo some serious damage. I suspect it’s too late.

Wall Street, at least, is pleased with the decision. Shares of HP (NYSE: HPQ) were up 96 cents, or 3.6%, to 27.95 early Friday afternoon.

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