HP's bad quarter could prove bad for America

China on verge of being world's top PC maker, and the PC business of HP or Dell could be headed there too

By , Computerworld |  IT Management, HP

New CEO Meg Whitman decided to maintain the PC unit, reasoning that it's too important to the HP brand and supply chain to abandon.

Michael Dell had reached a similar conclusion about his own company, saying that he expected the number of PCs in the world to grow from 1.5 billion to 2 billion in not too many years it would be crazy to sell off the division.

But that was last year.

Spin-off talk on Wall Street

Thanks to the continuing drag of the respective PC businesses on HP and Dell, the idea of spinning off the units is getting new traction on Wall Street.

For instance, analysts at USB and Topeka Capital Markets are suggesting such moves, according to recent reports in the Wall Street Journal and The Street.

HP said another reason it kept the PC business is to help it extend sales of servers and services to businesses. Few companies in the world come close to offering HP's range of equipment and integration capabilities.

Whitman's position on the PC division notwithstanding, the idea of a spin off won't go away unless HP can turn it around -- and find a way to offer tablets and other mobile technologies used by enterprises.

Potential buyers

Lenovo bought IBM's PC division in 2005 and instantly became the world's third largest PC vendor. It would be a likely candidate to buy spun off HP or Dell PC divisions as.

Lenovo is completely focused on the mobile and PC markets. It has clear advantage in the massive Chinese market while proving itself in other markets as well. It uses the word "Attack," to describe its execution strategy to investors.

If Lenovo didn't buy the HP and/or Dell U.S. PC divisions, then some other overseas company may.

A U.S. buyer of the units seems unlikely.

Oracle is a doubtful candidate -- it's still working to consume Sun Microsystems. Microsoft wouldn't likely create threats to its operating system by making PCs. Cisco has no talent for the consumer market, something it proved with the Flip camcorders.

If Lenovo or another China-based firm buys thither or both of the U.S. PC operations, it could pose challenges to U.S. technology leadership, some experts say.

Originally published on Computerworld |  Click here to read the original story.
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