HP Back In The PC Business Analysts Approve Move

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Analysts generally approve of new Hewlett-Packard CEO Meg Whitman’s decision to keep the $40 billion a year PC unit that her predecessor wanted to spin off – but they are warning Whitman will have to convince customers and shareholders that she can clean up what has been described by several as a “dog’s breakfast” of unfinished business.

Analysts generally approve of new Hewlett-Packard CEO Meg Whitman’s decision to keep the $40 billion a year PC unit that her predecessor wanted to spin off – but they are warning Whitman will have to convince customers and shareholders that she can clean up what has been described by several as a “dog’s breakfast” of unfinished business.

That will include working out what to do with its webOS division as it transitions to tablets based on Microsoft’s Windows software, replacing the ill-fated TouchPad.

Most analysts are in agreement that getting rid of its PC business would have been a problem for H-P’s customer base.

“The move by H-P is a huge victory for pragmatism,” Ovum Australia research director Kevin Noonan told CDN. He said that keeping its hardware business was a much better answer.

“H-P has been quite successful in the hardware space with quite loyal customers. Moving out of that and dropping the PC business would have been a bad outcome,” Noonan said.

“The company has an integrated channel which is quite effective, with a significant set of services going through PCs and to servers with similar components and service. All companies are going through change and moving to server businesses and for H-P it was no different – but how to manage that change and what it would have meant for existing business of H-P is problematic,” he told CDN.

“What is bad for H-P is playing this out in the public arena and the worry it causes customers with long contracts and in dealing with H-P. In the short term the move could create quite a bit of flack for airing the issue in the public arena. But, now sense has prevailed.”

During a conference call with analysts earlier this week, Whitman conceded that H-P “needs to be in the tablet business” – and that it intends to participate in that business using Microsoft’s upcoming Windows 8 operating system.

She also said a long-term decision regarding the webOS software business would be forthcoming within the “next couple of months.” H-P has already carried out a round of layoffs in that division and the future of its former leader Jon Rubinstein – a former Palm and Apple executive – is unclear.

Broker Needham & Co told clients H-P’s recent history of product flops and other missteps was among the “saddest examples of self-inflicted damage that we have seen in our 12 years of Wall Street research”.

H-P said Friday it would work to reassure its corporate partners who may have been concerned when the company said two months ago it might sell or spin off the PC product line.

Moody’s Investors Service said it was placing the company’s credit ratings “under review for possible downgrade,” adding that the review will focus on the company’s “unfolding corporate strategy” and financing under its new CEO.

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