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HP's PC, Services Units Under Scrutiny

In annual report filed with SEC, tech giant says it's considering divesture of businesses that don't fit with its long-term plans. Will CEO Whitman stick with the PC business?

Paul McDougall

January 2, 2013

3 Min Read

Hewlett Packard said it may divest business units or assets that no longer fit with its long-term objectives, a sign that CEO Meg Whitman may be looking to streamline the struggling tech titan's operations. In its annual report, filed with the Securities Exchange Commission, HP said, "We also continue to evaluate the potential disposition of assets and businesses that no longer help us meet our objectives."

In the document, filed on Friday just before the New Year's break, HP added, "When we decide to sell assets or a business, we may encounter difficulty finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives."

HP did not specify which units could be on the block, nor has it commented further on the filing, but its recent financial maneuverings provide strong indications.

The company's Enterprise Services, or outsourcing, unit could be under scrutiny. Last August, HP announced that the unit's performance was so poor that the company would write down its value by $8 billion in third quarter of 2012. At the same time, HP announced that then Enterprise Services chief John Visentin would be leaving the company.

HP's Enterprise Services unit mainly comprises assets the company acquired through its $13.9 billion acquisition of Plano, Texas-based Electronic Data Systems in 2008.

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The deal was supposed to put HP into IT Services' big leagues and make it a legitimate challenger to market leader IBM. But it never lived up to expectations.

Beyond a handful of high-profile customer wins, the most notable being Procter & Gamble, the deal failed to make HP a services juggernaut along the lines of Big Blue. HP's services revenues fell 2%, year over year, to $35 billion in the company's most recent fiscal year.

Another unit that could be up for grabs is HP's Personal Systems group, which sells PCs, tablets and other end-user devices. That group's revenues fell 10% in the most recent fiscal year, to $35.7 billion. It, along with the rest of the PC industry, has been hit hard by consumers and business road warriors' embrace of non-Windows tablets and smartphones.

HP and other Microsoft partners are betting on Windows 8 to help reverse the trend, but early sales of devices powered by Redmond's new OS are said to be slow.

HP's PC business has been on the block previously. Former CEO Leo Apotheker said last August that he would seek a buyer for the unit, and shut down all of the company's WebOS efforts. HP gained WebOS through its $1.2 billion acquisition of Palm in 2010. Apotheker planned to use it as a PC operating system along with Windows before deciding to axe the PC unit. HP's board fired him last September after losing faith in his strategy, replacing him with Whitman.

HP shares were up more than 5% in morning trading Wednesday.

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About the Author(s)

Paul McDougall

Editor At Large, InformationWeek

Paul McDougall is a former editor for InformationWeek.

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