Just recently, we discussed the issue of how HP was contemplating the spin-off of its Personal Systems Group – the division of the company responsible for making the computers and peripherals that most people think of when they think of HP. Derided by analysts and shareholders alike, the company seems to be moving forward with their plan, as a new ad campaign shows.
When we spoke about this originally, we mentioned that spinning off the PC division would allow the new company the possibility for greater flexibility and latitude in responding to market changes. There are notable precedents for making a change like this – AMD spun off its fabrication plants to produce Global Foundries in 2009. AT&T was split into multiple “Baby Bells” back in the day.
Academics have proven, too, that spinning off divisions from within a company can be profitable for both parent and child companies. Both are statistically more likely to outperform peers on the standard stock indices. Still, it seems unusual for HP to be so public, and so wavering, with its future plans. HP has experienced a substantial amount of negative press over its recent handling of the TouchPad and webOS fiasco. Ending those products less than two months after their entry has shaken public confidence; retailers are reporting that shoppers are coming in worried about HP and demanding to know if the company was going under.
Obviously, that isn’t going to happen – both the above ad as well as a recent press tour tried to put across the idea that HP’s PC division is a $40 billion enterprise in its own right. It’s true that selling two PCs a second is no mean task. The question remains, though, that even if growth is slow in their PC division, it’s stable, and being the world’s number one PC maker has its advantages – so why get rid of it?
New CEO Léo Apotheker is behind the move. A former enterprise software chief, he is behind HP’s recent acquition of Autonomy, a move that could immediately put them into place as a major enterprise services player. Whether it’s a good move for HP’s future is hard to say at this point, but it’s clear that the only one pushing for it is Apotheker – the markets showed their clear dismissal for the idea. That pushed HP’s stock down by a whopping 40%, or the biggest drop since Black Monday’s stock market crash back in 1987.