SAN FRANCISCO (AP) - Hewlett-Packard Co. has decided against spinning off or selling its PC division _ a plan first brought to light in August by the technology conglomerate’s now former CEO Leo Apotheker.
HP said on Thursday that it reached its decision after evaluating the strategic, financial and operational impact of spinning off the business unit, which is the world’s biggest manufacturer of desktop and notebook computers for consumers and businesses.
The unit supplies a third of HP’s revenue, and PCs are an area where the company is a market leader. But it is HP’s least profitable division, and its disposal was meant to be part of Apotheker’s plan to transform the Silicon Valley stalwart into a twin of East Coast rival IBM Corp.: A company focused on businesses, rather than both businesses and consumers.
Hewlett-Packard’s new CEO Meg Whitman said that keeping the unit within the company is right for HP, its customers, shareholders and business partners.
Deciding what to do with the unit has been one of the biggest challenges for Whitman, a former head of online marketplace operator eBay Inc. who joined Palo Alto-based HP in September after Apotheker was fired.
A month before her appointment as chief executive, Apotheker said the PC business would go up for sale in a badly blundered announcement that hastened his demise. At that time, HP also said it would exit the tablet computer and smartphone business and buy business software maker Autonomy Corp. for about $10 billion.
Carving out the business would have been a tricky kind of surgery, given its enormity. Steve Diamond, an associate professor at Santa Clara University School of Law, said “tearing apart a business unit of that size is like taking out organs.”
“It’s very painful. It’s like dividing Siamese twins. It’s very, very difficult to do and you don’t know how it’s going to come out,” he said.
HP appears to have reached a similar conclusion.
The company said that its evaluation of the business unit revealed a deep integration across key operations, such as its supply chain and procurement. Ultimately, the review found that the cost to recreate these operations in a standalone company outweighed any benefits of selling the PC unit.
Some analysts cheered HP’s decision as the right move, adding they were happy that Whitman made the announcement so rapidly. She had previously said the company would make a determination about the business by the end of the year.
“The fact that Meg pushed this decision very quickly is absolutely cleaning up the mistakes of the past,” said Gartner analyst Mark Fabbi.
Forrester Research analyst Frank Gillett said HP never should have considered removing its PC unit, and the move to keep it “seems like the right decision for the business given market conditions.”
“Hopefully it’s the beginning of showing they’ve got the process and people in place to work these things through,” he said. “But it is puzzling that it was hard for them to figure out.”
Gillett thinks HP may now be able to thin out its PC family _ similar to what Steve Jobs did at Apple in order to resuscitate the company in the `90s _ and focus on just a few devices with attractive features.
“It’s something they have the potential to do that few others do,” Gillett said.
Analysts said they don’t see any long-term consequences for HP now that it has made its decision. But there’s still a big question mark: How will HP compete in the rapidly growing mobile device market?
As part of its PC business spinoff announcement, HP also said it would stop making tablet computers and smartphones by October _ effectively killing flailing smartphone pioneer Palm Inc., which HP bought in 2010 for $1.8 billion.
With Palm, HP got the intuitive WebOS software, which ran on several smartphones. In July, HP released a tablet called the TouchPad that also ran WebOS. But the devices never caught on with consumers, many of whom were more enticed by Apple Inc.’s iPhone and iPad and smartphones running Google Inc.’s Android software. HP still hasn’t said what it plans to do with WebOS.
Shares of Palo Alto, Calif.-based HP rose 17 cents to $27.16 in after-hours trading. In regular trading on Thursday, the stock added $1.24, or 4.8 percent, to close at $26.99.
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