2 Reasons HP Should Not Spin Off The PC Business

Ben Bajarin / September 22nd, 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.

Ben Bajarin

Ben Bajarin is a Principal Analyst and the head of primary research at Creative Strategies, Inc - An industry analysis, market intelligence and research firm located in Silicon Valley. His primary focus is consumer technology and market trend research and he is responsible for studying over 30 countries. Full Bio
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