Reversing Course, Hewlett-Packard to Keep PC Unit

Oct. 28, 2011

Whitman's announcement was a dramatic repudiation of strategic decisions which led to the ouster of her predecessor.

Hewlett-Packard's new chief executive Meg Whitman, just five weeks into her tenure, said on Oct. 27 that the company will keep its personal computer division and also resume making tablets.

Whitman's announcements were a dramatic repudiation of strategic decisions which led to the ouster of her predecessor, Leo Apotheker, after less than a year at the helm of the world's biggest computer maker. Apotheker, who was fired by HP's board in September, had proposed spinning off the PC unit and stopped production of the TouchPad, HP's rival to Apple's iPad, in a shift towards software and services for businesses.

"HP objectively evaluated the strategic, financial and operational impact of spinning off PSG," Whitman said, using the acronym for HP's Personal Systems Group which makes PCs.

"It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees," Whitman said. "HP is committed to PSG, and together we are stronger."

HP said the PC unit would be "a key component of HP's strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers."

"As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry's broadest portfolio of PCs, workstations and more," said Todd Bradley, the executive vice president of HP's Personal Systems Group. "We intend to make the leading PC business in the world even better."

Bradley said tablets were helping to usher in a "new age of personal computing" and it was "not too late" to get into the market dominated so far by the iPad.

Shares in the Palo Alto, California-based HP plunged 20% on August 19, the day after Apotheker announced the possible spinoff of the PC unit, and lost 40% of their value during his tenure. "We confused the market pretty dramatically on August 18," Whitman conceded on Oct. 28.

Whitman declined to reveal what HP planned to do with webOS, but said HP would make tablet computers running Microsoft's upcoming Windows 8 operating system. "We need to be in the tablet business," Whitman said.