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HP flip-flop: Company keeping PC business

Hewlett Packard's new chief executive Meg Whitman has made her first major decision: HP is going to keep its personal systems group and will continue to sell PCs after all.

HP's former CEO, Leo Apotheker, sought to get HP out of the PC business and focus more on software and information. He was fired last month and replaced by Whitman.

"HP and PSG are better together," Whitman said during a conference call Thursday afternoon. She said that the decision had the full support of the board of directors as well as HP's executive team.

During the call, Whitman and other HP execs said the costs and risks of getting out of the PC busines would have outweighed any potential upside. The company pegged the potential cost to HP at $1.5 billion.

"Uncertainty is never your friend," Whitman said.

But it's a description that has followed HP ever since Aug. 18 when the company said it inteneded to exit the PC business. Alluding to the difficult job ahead, Whitman acknowledged that HP "had confused the market."

"It's hard to know what the hangover effect of Aug. 18 is," Whitman said. "But we're going to fight for every order and I think we'll be back on our front foot."

And fight is the appropriate adjective. Todd Bradley, who head's the PSG division, acknowledged during the conference call that HP now faces "enormous competitive pressure," adding that he expected "pressure in the near term."

The company didn't offer much in the way of product changes, although Whitman said that HP would decide the fate of WebOS, the mobile operating system that it acquired by buying Palm in April 2010, within the next couple of months. The company also rejected suggestions that it was late in tablet computing and that it planned major changes. (Over the summer, HP said it was discontinuing its TouchPad

Back to the future?

History may not repeat itself exactly but it often comes surprisingly close. In the 1990s, IBM faced a similar dilemma. The company was struggling and its CEO, John Akers, proposed breaking up the company into smaller so-called "baby Blues." Akers was subsequently eased into retirement and his successor, Lou Gerstner, subsequently put the kibosh on the proposal. Only later, after IBM had regained its footing, did the company sell off its PC business to Lenovo in 1995.

ZDNet: HP keeping PC unit
HP retains top PC spot

Given its stormy history - HP has had 4 CEOs since 2005 - it's unclear whether Whitman really intends to keep the PC business or is holding on for now to create at least an appearance of stability. Since announcing the plan for a spin off, HP's PC business has "imploded," according to Jefferies analyst Peter Misek. In a research note issued earlier this week, he wrote:

"In our global travels we have heard time and time again how your PC business has virtually imploded since the spin-off decision. Local managers in Asia, Latin America, and Europe are powerless to fight the competitive message, and customers fear that you are not committed to the business and therefore are going elsewhere (primarily Lenovo and Dell). We suggest either 1) immediately announce a commitment to the PC business (e.g., multi-year onsite warranties, partner with local banks to finance), or 2) have a private equity firm buy a stake in the company."

The news out of HP coincidentally followed upon the heels of new research from both IDC and Gartner, which put the company No. 1 in PC shipments and market share during the third quarter.

Unit shipments rose 3.2 percent from a year ago, according to Gartner whileIDC put the gains at 3.6 percent. That gave HP a global market share of 17.7%, based on the data supplied by Gartner. IDC put it slightly higher at 18.1%.

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