2 Reasons HP Should Not Spin Off The PC Business

on September 22, 2011

I have been thinking about this ever since the news broke that HP wanted to spin-off their PC business. My company Creative Strategies, Inc has a long history with HP of providing industry and trend analysis to many key groups within the company. Because of that relationship, it would pain me to see HP make a questionable decision to spin-off their PC business.

Right now HP appears to be a company with serious identity issues. We don’t know what is going to happen with their current CEO although rumors are floating that there may be a change at the top. As the board is faced with many tough decisions, I genuinely hope that with these gut wrenching decisions they also reconsider spinning of the PC business.

Bloomberg ran a report yesterday stating that they are in fact reconsidering the proposal to spin-off the PC group. I hope this report is true.

There are two fundamental reasons why spinning off the PC business is the wrong decision for HP.

Hardware Only Business is Dead

A simple look at the history of the technology business highlights some profound truth’s about how hardware evolves. We are in a world where every PC maker other than Apple is dealing with the commoditization of hardware. If HP was to spin-off the PC business they would leave the new entity to solely compete in the global economy with price. This is a battle that a US vendor cannot win against the low-cost strategies of Asian OEM’s.

Proprietary software and services are needed in order to differentiate and add value beyond price. A hardware only business does not have this advantage and can only compete on price.

A hardware only PC business would not likely survive where the industry trends are heading. Which leads to the second reason this is a bad idea.

We Would Lose a Key US Based OEM

If the above scenario played out we would lose a key US-based PC vendor. Only Dell and Apple would be left. Please note, I am not saying HP would go away, only that the spinoff and whatever it would be called have a hard time thriving as a hardware only business.

Because of the historic role HP’s hardware has played in the evolution of the technology industry, it would be tragic if it faded into irrelevance.

I fully understand HP’s desire to move more into the software and services business. Apple has the same strategy, but for Apple, the hardware continues to be a key strategic element to complete and differentiate their ecosystem.

I wish HP would understand this and value the role of hardware in our computing future. Indeed, their PCs and tablets can provide a powerful screen that taps into next generation software and service optimized for their own ecosystem. And they have many of the key elements to continue to thrive as a hardware, software and services company.

Rather I would love to see them craft a vision of what the future should look like with HP hardware, software and services in it and then relentlessly innovate.