HP leaning towards un-spinning-off PSG | webOS Nation
 
 

HP leaning towards un-spinning-off PSG 38

by Derek Kessler Wed, 12 Oct 2011 7:41 pm EDT

New HP CEO Meg Whitman’s been understandably cautious about the direction in which she’ll take HP. It’s rare that an incoming CEO publicly throws out her predecessors plans on day one, and Whitman’s no exception. That said, she did say that she wants to make speedy decisions on Apotheker’s initiatives, especially the planned sale or spin-off of the computer-producing Personal Systems Group.

The $40 billion chunk of HP was planned to be spun off by the ousted CEO, with the intent of turning HP into a purely software and enterprise services company that also makes printers. Investor and industry reaction to the planned lobotomy was understandably on the unhappy side, and HP’s stock price suffered accordingly. It all led to Apotheker’s ouster and the instatement of Meg Whitman as CEO.

According to The Wall Street Journal, HP’s now leaning heavily towards not splitting itself, realizing the added costs that would be incurred on both entities should the division happen. There’s the obvious – dual accounting, human resources, and marketing departments. But then there’s the more nitty gritty: economies of scale. For those of you that weren’t paying attention in Econ 101, economies of scale is the concept that the larger your business, the less it costs to do business (just compare the prices at Wal-Mart and the neighborhood general store).

By splitting off the PSG, both halves of HP would suffer from decreased economies of scale, particularly in supplier relations. HP saves a buttload on component costs because they’re buying of personal computers, servers, printers, and the like. Having two separate contracts with the same supplier would result in lower savings (due to lower purchasing quantities per contract) and thus lower profits – blowing a whole in the reasoning for the spin-off: that the PSG would do better separate from the HP mothership.

So what happens now? Whitman said that she wants to come to a decision about the PSG spin-off by the end of this month. Judging by the Journal’s sources and our own intuition on the matter, we’d say a spin-off is unlikely to occur, for the mere reason that it’d cost too much. HP’s all about increasing shareholder value – the tens of billions of dollars of obliterated shareholder wealth from Apotheker’s tenure should tell you all you need to know about the motivations behind this decision.

Source: The Wall Street Journal; Thanks to everybody that sent this in!

38 Comments

smart move and was stunned when they even thought of the other option. However, I don't see a positive impact to webOS staying put or picking back up inside HP with this move. My guess is webOS is being sold very soon or it will be put to death in the coming months.

If PSG stays in HP, I bet they focus on tablets running Windows 8 for the enterprise, not consumer space.

Meg Might Have A Brain After All God Knows They Need One Over There...

Personally I Would Like To See HTC Get webOS, A Good OS On Some Sweet HTC Software Is A Good Way To Get Back In The Game...

I care less about PC Division. We need to know the fate of webOS.

I'm telling you - it will soon be sold or dead for tablets and phones. HP heading back to Windows for tablets is my guess.

You're convinced that you're guessing? OK, just wanna clear that up.

For the first time in 2 months it moved. Now we just need to hear about what's going to happen to webOS.

HP, do the smart thing. Allow webOS to mature and gain marketshare. Remember, it's a MARATHON.

this doesn't help us much except that PSG used to own webOS but didn't they say webOS software side was moved from PSG to the r&d division. SO not sure this helps us necessarily here?

Wasn't the fate of webOS supposed to be decided in an all-hands October 12 meeting? Anyone seen the scoop on what happened there?

HP has missed the tablet, slim note book, cloud computing, and many others. Next move should be R&D followed by the next cutting edge thing. I would love to see a slim notebook like the Zenbook or Macbook Air running Web OS, and a track pad (for the Web OS gestures). USB3, solid state hard drive and long battery life.

Also would like to see a HP printer with decent priced ink.

Also if they have a notebook with WebOS then they dont have to pay microsoft.

"Also would like to see a HP printer with decent priced ink."

Are you hoping for pigs to fly too? ;-) I think that would happen before HP lowered their ridiculous prices on ink!

Well this only goes to further prove they are off their rockers at HP....they lost all that money drove their stock down substantially and now they aren't going to do it...

However, I WANT Meg to have HP sell webOS....HP doesn't have the fortitude or the tech backbone to make webOS a strong contender....it's time for HP to write off the investment and sell webOS for all of our well being!

Take care,

Jay

And what does this mean for webOS?

What they need to do is just give PSG a little more autonomy within HP rather than just splitting them off.

Derek, my webOS brother, this needs to be said, but with the understanding that it's coming from a place of kindness and respect: your content is interesting, but your writing needs a ton of help. Good substance, but major style point deductions. Sometimes it's just brutal trying to read through one of your articles. But I don't want to just point out a flaw, I am here to offer my services. Currently I am an IT project manager, but I have a pretty strong background in various forms of communication--both verbal and written, with experience in technical, non-technical, legal (IP law), sales, and instructional/education--for a wide range of audiences. I've been both an originating writer and an editor. And I'm pretty darn good. I can't edit each and every article for you--I just don't have the time. However, I can certainly manage at least one article per day, and I'll bet there are enough other writers out there who could do the same, such that you would be able to have all of your articles edited before posting to the web.

Again--not trying to pick on you. I do enjoy your content. And I can appreciate that you attempt to present the information in an informal manner, so that it's enjoyable to read, and not just another boring, stodgy article. We editors would not have to take anything away from your style or substance, rather, we would improve your grammar, spelling, and syntax such that your style shines even brighter than it does now.

Case in point: In the statement, "blowing a whole in the reasoning for the spin-off:", "whole" should actually read, "hole", and you might consider changing "reasoning" to "rationale". Subtle errors like that are just entirely too distracting to many readers. As you can see, we can improve that without changing the meaning or your nonchalant, informal style. And instead of "buttload", maybe you could use "boat load". Same style, same meaning, but less off-putting to certain of your readers.

The result will be more enjoyable reading for site visitors, more clarity in what you are trying to convey, and possibly even more respect among your blogging brethren. Who knows, it may even boost the chances of other publications with a larger audience picking up your blog every now and then.

Please consider it. If not for us, at least consider it for your own benefit.

Much respect and gratitude for all you do for the community,
tobeaman

this is dumb

Constructive advice and an offer to help out isn't dumb. I appreciate the articles here on PC as much as anyone, but errors like those tobeaman mentioned can detract from the perceived professionalism of the site.

That said, I really hope there's a rockin' new WebOS phone when my ATT contract expires next spring. Hang in there, my trusty Pre+!

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You've been watching too much Seinfeld.

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@tobeaman: I think it also needs to be said that no one really cares about the issue you raised. This is not the Wall Street Journal, so no need for writing N@zi's. Most of us could care less if Derek writes these articles with his toes, while drunk, as long as he's conveying content (which is hard enough to come by lately).

Honestly, reading a few of your suggestions, I thought "really, REALLY?", are those things REALLY such a hindrance to your consumption of this content? Talk about splitting hairs. I've done work in many of the same fields as you btw, and you should realize, especially as a project manager, that most people merely "skim" content anyway, especially on the web. These aren't Pulitzer submissions, or timeless classics I plan to print, bind, and put on my bookshelf, so Derek's writings are perfectly serviceable for their purpose and audience. Your offer to help, while appreciated I'm sure, is superfluous. With all due respect, I say get over yourself and leave the man alone.

Ok look,

Anyone waiting to hear the "fate" of webOS, do yourself a big favor and move on. ITS DEAD. Get over it. I like it just as much as anyone but its DEAD! The debate needs to stop. Your touchpad is NOT going to get any better then it is now. Maybe running a droid OS is about the only reasonable option.

What the **** do you really think is gonna happen? Sheeesh.....

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Ok ... Scrooge.
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It has already improved since it "died". Granted it won't grow like we all wish it would but hey a 99.00 / 149.00 touchpad that still has some dedicated developers. I'll stick around a little longer.

HP make the BEST decision for webOS so I can tell my friends I made the RIGHT decision to stay and don't ship to android or IOS 5 :-)

you cam bet Todd Bradley is trying to get them to spin off PIG so he can be free of the idiots on the HP board.

People here are seriously asking what this means for WebOS?

SPOILER ALERT: NOTHING.

The two decisions HP made that day were independent of each other, people. There was a decision to kill off WebOS hardware - not because they wanted to spinoff the business, but because it didn't make sales goals and would have lost even more money at the new reduced $399 price point. The CFO, Cathy Lesjak, explicitly said this on their conference call.

The OTHER decision was to possibly spin off ALL hardware, but it was independent of the first WebOS decision. How do we know? Uh, because the only hardware that they actually stopped making and advertising for was WEBOS HARDWARE.

Whatever happens to their PSG, WebOS hardware is done. The OS will follow soon after.

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["People here are seriously asking what this means for WebOS? ... SPOILER ALERT: NOTHING."]

Some people look beyond the doom and gloom, and see a company that has to answer to its' shareholders. But yes, you may be right - "NOTHING" may happen. Then again, you may be looking at this with too much anger.

When it comes to the HP Board, they have one thing in common with Android (despite its' dominance at the moment). They both have lived a fractured lifestyle.

In the case of a company - like HP - that trades on the open market, shareholders hold a big stick when it comes to money. Especially since HP stock and "goodwill" (lol), go hand in hand. When you run a mutual fund that has an HP investment of say a 100 million, that is now worth 60 mil, you tend to get more vocal.

In HP's case, not only is the Competition salivating with delight, and acting on it, the consumer senses a "distressed" HP - reality or not - and moves on. Add a palm's worth of webOS fans - a vocal & spirited group - and you have a 3-pronged catalyst for change. People forget HP changed 5 Board members AFTER Leo entered the fray. I can only imagine the pissing matches in that Board room.

As far as HP is concerned, they have to resurrect the hardware division, fend off the Comp, and hope it can salvage a break even (or slight loss) from the webOS backlash. That means moving it out - with its' valuable patents included - to someone who'll give it a chance to shine. Anything less (ie. killing it outright), serves no useful purpose to the bottom line. And that's what drives any decision. At least when all eyes are on Board - so to speak.
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I didn't say nothing would happen. I said whatever they decide regarding PSG will have no bearing on them getting back into WebOS hardware. The WebOS decision was based on cold-eyed pragmatism, and the fire sale was their way of burning that bridge and closing that chapter so that they could get it off the books and never bother again.

Is there hope that they could sell it to someone else AND there be a company ready to cough up a lot of cash for a product that has failed twice in the market AND that the new company would want to keep it in its current form AND want to make phones as well as tablets?

Sure. The same way I hope I win Powerball when I buy two tickets whenever it gets above $100 million. In other words, I ain't planning on it.

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["The WebOS decision was based on cold-eyed pragmatism, and the fire sale was their way of burning that bridge and closing that chapter so that they could get it off the books and never bother again."]

I can see this perception, based on Leo wanting to ride out the Palm purchase he had nothing to do with. Now that Meg is in the fold, and some new Board directors, what happens next can't be as bad as Leo's direction.

One apparent fault in my previous argument, is yesterday's reported sales in HP's PC division. Shipments were up 5.3% in the 3rd Quarter, and HP's market share increased from 17.3 to 17.7%. Lenovo jumped to #2 (13.5%), while Dell fell to 3rd place with 11.1%.

Granted, the "abandonment" effect could still play out, but these numbers must have HP rethinking their strategy. As was reported (as a rumour of course), HP is rethinking their spin-off, due to the economies of scale - 2 company costs vs 1 company cost.

As for who to sell webOS to, HTC could be an ideal company. They have the hardware (lots of it), and as long as Android is going through its' Google/Motorola phase, webOS might present a more "secure" option. Over time, webOS could be their dominant platform, one that doesn't have to worry about patents, and doesn't have to pay MS licensing fees. As well, HTC would be able to add to their HTC Flyer, with more tablet options - that with some tune-ups - is pretty much ready to go. Essentially they can ease into the webOS world, without undue pressure - while they rejig the Pre3 (Pre4?) and Touchpad (64Gb white model?).

For HP, selling to a legit company (one with competent hardware) allows them to minimize the fall-out (and bad-will) that went with discontinuing webOS devices.
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HTC has already publicly rejected this idea (thread in the forums) and so has Samsung, which leaves basically no one that makes hardware that we care about. Sony already said they "wouldn't feel comfortable investing in a platform that isn't as good as the one that we currently use", and that was about Windows Phone! No way they bother with WebOS.

No one good is left and HP aint going to do it, sooooooo......

Even without PSG, HP would still make a ton of enterprise infrastructure hardware. No-one has suggested that they are going to stop building servers and storage for the enterprise.

All-in-one PCs being shipped with WebOS desktop version (or a layer that reminds it running on Windows). This would certainly increase the amount of people who actually know what WebOS is and would bring WebOS (software and hardware) back in the game.

....and they didnt think of this before because.....?

oh yea! they're idiots. i almost forgot.

Weren't all the reasons for not splitting the company already there. It's like they just realized the cost of a split. This is confusing to a non-business guy like myself. A business person would have known all of those reasons for not splitting long ago. There is no discovery here.

I'm confused.

you are right. That is, because HP is managed by idiots, with only a collective (shareholder-connected) brain, so they do things like: "hmm, maybe we should do this... Hold on, our shares have dropped 20% after that, so it must have been a bad idea. Lets revise it"

Leo was only half the problem at HP. The other half gave him a job, authorized him to put their plan in place, and then took that job away from him after the humiliating haranguing by every analyst in the industry (and not to mention investors fleeing their sinking ship like a horde of rats).

If the HP board continues to be inept, then HP as a company will continue to be mediocre.

The mediocrity will not change until at least Ray Lane is gone.

I was just wondering what type of phones the HP board has. Maybe blackberry or iphone?

Well, even if HP decides to keep the PSG, I'm not holding my breath for new HP-branded WebOS devices. It would be nice, but I'm not going to lose sleep over it. The one good thing that has come out of this whole debacle is that I was able to get a hold of a Touchpad on day 1 of the fire-sale. And I love it. There is still a chance that the WebOS software unit will be sold, which gives me some hope of maybe having another WebOS phone in the future. My Pre is gathering dust in a closet, and I use an Android phone now... but Android is so clunky.

There is value in a good software product such as WebOS. HP or no HP, it would be foolish to let such a good OS fall into oblivion, when the competition is so lame. An open-source spin off would still be better than nothing. I just can't stand my Android phone anymore.

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