HP to Transform the Company: Plans to Spin Off PC Business

From X-bit Labs: Hewlett Packard, one of the world's largest IT companies, announced on Thursday that its board of directors has authorized the evaluation of strategic alternatives for its Personal Systems Group (PSG), including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction.

HP is implementing a plan to fundamentally transform the company. An important component of the plan is focusing its investments, resources and management attention to drive higher value solutions to enterprise, small and midsize business and public sector customers. HP believes that the exploration of alternatives for PSG will help the company accomplish its strategic goals and pursue profitable growth and enhanced shareholder value. A post-transaction HP would continue to help its customers manage the information explosion and address their most critical needs through a portfolio that spans printing, software, services, servers, storage and networking.

"In March we outlined a strategy for HP, built on cloud, solutions and software to address the changing requirements of our customers, shaped heavily by secular market trends that are redefining how technology is consumed and deployed. Since then, we have observed the acceleration of these market trends, which has led us to evaluate additional steps to transform HP to meet emerging opportunities," said Léo Apotheker, HP president and chief executive officer.

The personal computing market is quickly evolving with new form factors and application ecosystems. Given these realities, HP believes it is in the best interests of the company and its shareholders to explore ways for PSG to position itself to address these rapid changes and maintain its technological and market leadership positions.

HP's PSG is the leading manufacturer of personal computers in the world and had annual revenues of approximately $41 billion in fiscal year 2010. PSG enjoys leading global market positions in consumer and commercial PCs. But those leading positions come at a cost of very thin margins. Furthermore, given the size of HP, it is hard to keep the PC business unit competitive as the decision making processes take a long time, which leads to lost opportunities and long time-to-market.

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