In nod to IBM, HP overhaul minimizes consumers

August 18, 2011|Jordan Robertson, AP Technology Writer
  • FILE - In this Feb. 2, 2010 file photo, the Palm Pre Plus, left, and the Palm Pixi Plus are shown in San Francisco. In a dramatic reshuffling, Hewlett-Packard Co. on Thursday, Aug. 18, 2011 said that it will discontinue its tablet computer and smartphone products and may sell or spin off its PC division, bowing out of the consumer businesses. The announcement comes just two years after spending $1.8 billion on smartphone maker Palm, which gave HP the webOS software that has been praised by critics but largely been ignored by the marketplace.
FILE - In this Feb. 2, 2010 file photo, the Palm Pre Plus, left, and the Palm… (AP Photo/Jeff Chiu, File )

Hewlett-Packard Co. is surrendering in smartphones and tablet computers and has put its personal computer division up for sale, as new CEO Leo Apotheker tries to transform the Silicon Valley stalwart into a twin of East Coast archrival IBM Corp.

The restructuring announced Thursday contains an unmistakable message: HP has failed to cater to both consumers and corporations. As a result, it needs to exit most of its consumer businesses, just as IBM did six years ago.

The overhaul will have three parts:

— HP will stop making tablet computers and smartphones by October.

— It will try to spin off or sell its PC business, the world’s largest. By the end of next year, HP computers could be sold under another company’s name.

— The company plans to buy business software maker Autonomy Corp. for about $10 billion in one of the biggest takeovers in HP’s 72-year history.

HP, the largest technology company in the world by revenue, will continue to sell servers and other equipment to business customers, just as IBM now does. Those businesses currently don’t generate as much revenue for HP as PCs, but they have higher profit margins.

Apotheker would not say whether any jobs will be cut. HP plans to take a charge of about $1 billion for restructuring and related costs, some of which could go for severance payments. HP employs more than 300,000 people worldwide.

The changes are motivated by a shift toward an IBM-style business model, which is focused on selling to corporations and governments.

But the influence of Steve Jobs and Apple Inc. shouldn’t be underestimated. Apple is the hottest consumer electronics company on the planet with its highly popular iPhones and iPads.

“Apple singlehandedly knocked HP out of the PC, smartphone and tablet business,’’ Gleacher & Co. analyst Brian Marshall said in an interview.

Rather than remain locked in a futile fight with a company that seems to have found the magic touch on making hit consumer products, HP decided to whittle its competition to the other business technology specialists — namely, IBM, Oracle Corp. and Cisco Systems Inc., Marshall said.

The focus makes sense considering that Apotheker spent most of his career at German business software maker SAP AG, another company that catered to the technology needs of companies and government agencies.

“This is his bread and butter,’’ Marshall said. “Now he has to deliver.’’

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