The PC business is not doing well at the moment, with traditional PC sales being supplanted by tablet PCs and smartphones, among other reasons.
And one of the industry’s oldest and largest players, Hewlett-Packard Co is considering exiting the market. It may spin off its declining PC business into a separate company, according to an August 18, 2011 Reuters story.
At the same time, HP plans to end its WebOS-based phones and its TouchPad tablet which hit the market in June, 2011, with little success.
The company also announced its planned purchase of Autonomy Corp, a British based software maker, for $11.7 billion. The move signals the company’s move away from hardware and more into software and services.
The company’s greatest growth and successful entry into other markets may come about through mergers and acquisitions.
HP’s CEO Leo Apothker had to answer for disappointing third quarter earnings.
The company expects full-year revenue of $127.2 billion to $127.6 billion, substantially off a previous estimate of $129 billion to $130 billion. It also reduced its earnings per share estimate to a range of $3.59 to $3.70, down from an earlier estimate of at least $4.27 per share.
These disappointing numbers sent its shares down 6 percent to a new 52- week low. After-hours trade saw the shares fall another 7 percent to $27.50 per share.
Apotheker, former SAP AG CEO, came to HP with the charter to breathe new life into HP. Some say the proposed acquisition of Autonomy signals Apotheker’s attempt to follow the IBM model. That company moved away from dependence on hardware and more into a software and services model in the late 90’s.
HP "is saying 'I want to be more like IBM.' They divested their PC business and they got more involved in software," said FBN Securities analyst Shelby Seyrafi.
It’s expected Apotheker may go on a mergers and acquisition binge to change the look and revenue model of HP.
Long a hardware-dependent company, HP grew that business through a series of acquisitions of companies like Compaq and Palm.
The proposed purchase of cloud search-software specialist Autonomy, which analysts say may draw rival bids, signals HP’s boldest step into the software and technology.
"HP is recognizing what the world has recognized, which is hardware in terms of consumers is not a huge growth business anymore," said Michael Yoshikami, chief executive of YCMNET Advisors, a minor shareholder in HP. "It's not where the money is. It's in keeping with the new CEO's perspective that they want to be more in services and more business oriented."
THE TOUCHPAD THAT CAME TOO LATE?
HP's PC group, the Personal Systems Group, also includes smartphones, tablets and the WebOS operating system. Although the group accounted for $41 billion in revenue, it contributed only about 13 percent of profit.
HP’s TouchPad, coming online last July, never really took off. Part of the reason may have been getting it on shelves before it was fully ready, as well as a price point that matched Apple’s iPad.