HP to exit PC business in favor of software and services

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HP's move to exit the PC business, announced earlier this month, is a strategy designed to focus the company on higher-value, higher-margin businesses such as software, services and networking, according to the company and experts. On Aug. 18, HP announced that its board had approved a plan to explore strategic alternatives for its Personal Systems Group (PSG), which makes PCs, including a spinoff. HP added that it will discontinue manufacturing of webOS devices, including tablet PCs and smartphones. “The exploration of alternatives for PSG demonstrates our commitment to enhancing shareholder value and sharpening our strategic and financial focus,” said Leo Apotheker, president-CEO of HP, in a statement. He said the company would pursue a strategy focused on cloud-based applications, software and services, as well as supporting existing products. “Their PC business has been doing well from a customer standpoint,” said Dave Johnson, senior analyst at Forrester Research. “From an enterprise business standpoint, HP has been a reliable vendor.” However, he said, “The PC business is very much a commodity business. In this economy, you can either drop the cost through the floor or establish new differentiation, which is very hard to do. Most of the opportunity for profit lies in higher-margin, higher-value enterprise applications.” To further pursue its strategy, HP also announced that it plans to acquire Autonomy Group, a Cambridge, England, software company, in a deal valued at about $10.3 billion. Autonomy Group develops infrastructure software to help enterprises with such applications as business process management, Web content management, records archiving and customer interaction solutions. “Autonomy brings to HP higher-value business solutions that will help customers manage the explosion of information,” Apotheker said in a statement. “The acquisition of Autonomy is a smart move. HP is responding to a very real change in the IT markets they serve,” Johnson said. “The IT landscape is changing; empowered users are making decisions for IT needs that don't require IT approval. I think this opens up new opportunities for HP.” He also advised current HP customers to stay the course when it comes to selecting new PC vendors. “Don't evaluate other options yet,” Johnson said. “HP will be very focused on service and support.”
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