Who benefits most from HP exiting the PC business?
It's a post PC World, and the largest PC Manufacturer just blinked (or stumbled, or had a senior moment, or lost its mind). When I started this post the HP announcement was hours old. It is now about a month old and at HP much has changed, Leo Apotheker is out and now Meg Whitman is in charge. Hewlett Packard's stock tanked after Apotheker decision to kill the TouchPad and to spin-off the PC division. It rose on rumors of his imminent departure. It fell again when Whitman was named CEO.
The reality is whatever HP's strategy is moving forward, the last month makes it look like an indecisive, business amateur not a seasoned, innovative, PC market leader. HP under new leadership could reverse all of Apotheker recent decisions or they could decide to stay the course, recent news from HP indicates they are staying the course, let's see how long that lasts.
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Let's focus for a moment on HP's announcement about their PC business, and not the webOS decision. So who benefits most from HP PC business decision? Is it Hewlett Packard (HP), Dell, Apple, Lenovo or some other company?
[HP]
Well clearly HP believes that the PC business is either a distraction or a drain on financials of the company or both, but the PC business still has a legimate life with someone else or as a standalone business. HP must also believe that the rest of Hewlett Packard will be stronger without the PC business moving forward, or else why do it. HP must also believe that it can survive without its PC business and that the cash flow it provides was actually a loss leader. Best thing that could happed to HP's PC business is a spin-off and make it quick before the vultures start circling their Corporate Customers away from them.
Flipside:
- HP decision could go wrong fast, from the announcement to the end of the current fiscal quarter, if HP's PC business is currently a cash flow positive operation, then expect that to be made tougher by the announcement.
- If the PC business acted as a business entry for other products and services, then expect that to be made tougher by by the announcement.
- Announcing you will be exiting a business or selling a business tends to put a damper or delay on new contracts and contract renewals. If a Business Customer was on the fence, they may choose someone else and the related software, services and accessory equipment that goes along with it.
- Consumers may still choose to buy from HP during the transition, they'll look for good deals, discounts, etc that HP is sure to offer to keep sales flowing.
- Business Customers want partners that will support the equipment today, next week and next year.
- If HP was doing any government business, will that have to shift if they sell to a non US Manufacturer, possibly making the idea of a selling to a foreign entity less likely and a spin-off more likely.
[DELL]
Dell has been in a downward trend for awhile now. The vultures aren't circling, but Dell has tried to rebrand, rethink and reinvent its core businesses and it still survives. They've already announced their own stronger push to be a Software and Services company as well. Dell could see a reinvigorated PC Laptop business if HP's attempts to sell or spin-off their PC business is stalled in anyway. Some companies may choose to do business with Dell, just because they offer other services, products and accessories, something a new HP spin-off will likely not be able to offer out of the chute. From a Corporate Customer standpoint, DELL looks poised to be the Big Winner if HP decides to sell or spin-off its PC division. Would HP even consider selling its PC business to Dell? How would that change or impact the PC landscape?
Flipside:
- Dell was already struggling, making one wonder if they could even respond adequately to increased demand from Corporate Customers.
- Dell / IBM / HP were the former darlings of the Corporate PC environment. These computer manufacturers were exchanging customers every 3 years or so when contracts ran out.
- Who knows where Dell loyalties lay? Windows OS, Android, Windows Mobile or the next new thing to come along. It may give some Corporate Customers pause.
[APPLE]
Apple is in a very strong position, its iPad business is growing extremely fast, its iPhone and iPod business are still growing. Even its Computer business grew significantly although overshadowed by the iPad/iPhone growth. Apple has been increasing its share of Business Customers with iPhones and iPads, think of them as entry products. An exit by HP in the PC business could push more Corporate Customers to purchase a larger % of Apple Computers (MacBook Pros, MacBook Air, even the Mac Mini). The Apple products already made the switch to Intel CPUs, and it is easy enough to use BootCamp to create a dual boot machine (Windows and OSX) or create a Virtual Machine on an OS X box, allowing Corporate Customers to continue to run their Windows applications.
Flipside:
- Price point for Apple Computers is higher than comparably equipped PCs.
- Many PC users and open environment proponents often knock Apples locked down environment. That may make some Corporate Customers shy away from them (still others will embrace it).
- The Corporate Customers have long been PC havens, and Apple Computers / Macs have long been relegated to the Marketing and Creative departments.
- Corporate Customers may shy away from the Mac App Store approach, unless they can control what their employees can buy.
[LENOVO]
Is Lenovo in a buying mood, financial strength and frame of mind to buy HP PC business? I doubt it, but they could stand to benefit from a transition of HP PC business, there will be a vacuum as Consumers and Corporate Customers alike decide what to buy for the Back to School or Holiday Shopping. I don't think Lenovo will benefit from a US Consumer push, but they may just land a few Corporate Customers unwilling, or unable to wait on the outcome of HP's PC Business transition.
Flipside:
- Regardless of where all PC components are manufactured, Corporate and US Consumers are currently on a buy US made or US owned where they can. This hurts Lenovo
- Until HP's announcement Lenovo's outlook and the PC market in general has been in a downward trend. Blame it on the economy or the Post PC World, it doesn't matter. PC Sales as a global trend is down.
Whenever a company announces it's going to make a change before it actually does Business Focus, Sales, Profits and Cash Flow suffer. HP's decision will impact the next few fiscal quarters until a deal (Spin-Off or Sale) is completed, and there is no getting around that. What we non insiders don't know about the decision could fill volumes:
- Did HP alert any major Corporate Customers of its decision before it was announced? Unlikely since we know that the majority of the employees and executives did not know of the decision before the announcement.
- How many Corporate Customers will wait out the transition from HP division to HP spin-off, subsidary or divestiture of the PC business to a new owner? What Fiscal impact does HP anticipate?
- Why did Leo Apotheker and Board make the decision? Was it to make room for the Autonomy acquisition?
- Is Apotheker trying to compete or bury his old employer SAP, using HP to do it?
- CEOs using their new companies to compete with their old ones never works out well. Just ask Antonio Perez who manage to make Kodak into a Printer Company, by selling off Medical, Surveillance Systems and other businesses while buying up Large Format Printers and investing and using Kodaks Patents for Long Life Pigment inks. Where is Kodak today? Less than $4 / share and trying to sell patents to keep afloat.
- Talented employees in HPs PC Business unit are likely already searching for and preparing to leave for greener pastures. HP on the other hand will likely be paying incentives to keep some of the that talent stable and happy. In this current economy employees don't trust 99% of employers to look out for them, so they must look out for themselves. Expect HP to lose key Engineering and Business Talent during the transition.
I would like to believe that the big Winner from the HP decision to spin-off or sell its PC Business is APPLE. I think the Mac Computers just got a boost in time for Corporate Buying contracts for 2012 and Back To School all ahead of the expected October new iPhone announcement.
It's a post PC World, and the most innovative company looks poised to win on multiple fronts. The winner may depend on what your definition of innovative is.
from the mind of Henry Patterson for thinkitmapit.com ©2011











