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Summary:

It was shocking enough to learn last week that HP wants out of the PC business. But it was somewhat surprising HP told investors before finding a buyer. The likely reason? There’s really no one in a position to take it off their hands.

Clearance sale

It was shocking enough that the world’s largest maker of personal computers wants out of the business. But also surprising was that Hewlett-Packard went ahead and told investors it wants out before finding a buyer. Instead, it appears the company plans to spin off the group that currently sells about 15 million PCs per quarter. So why no buyer? There’s really no one in a position to take it off HP’s hands. And that speaks volumes about the state of the personal computer business.

The candidates

In terms of size, after HP, the largest PC makers are Dell, Lenovo, Acer and Toshiba. Of the 85 million PCs sold during the most recent quarter, those companies accounted for more than 60 percent of shipments, according to Gartner. Dell’s own founder and CEO has been having a grand time on Twitter at HP’s expense, so let’s assume the Round Rock guys aren’t going to come calling; not to mention they’re having their own trouble themselves selling PCs.

Lenovo already subsumed an American PC business seven years ago (IBM), Acer is struggling now after building up its own consumer PC business through a quick series of acquisitions several years back (Gateway, Packard Bell and E-Machines). And Toshiba’s sales are sluggish right now.

In other words, the only other major players in the business aren’t even that great at selling PCs themselves due to a transforming computer market. Over the past year, their businesses have either dropped or inched up only slightly, as consumer demand has tanked due to the economy and, as HP CEO Leo Apotheker pointed out himself last week, “the tablet effect is very real.”

The best-case scenario

The best-case scenario for selling a lot of PCs right now are companies with strong footholds in emerging markets like China (hello, Lenovo–and more recently–Apple ), those with an in to large enterprises through huge corporate contracts or those that supply services coupled with hardware (that’s Dell, and Lenovo again). But while Lenovo in theory might be able to make it work, it’s unlikely, as many have pointed out, that the U.S. government would go for the idea of selling major U.S. assets like that to a Chinese company.

The name that’s been bandied about most with regard to who might scoop up HP’s PC arm is Samsung. The company has many parts of the PC supply chain already covered, and they are making a push with their laptop business, which could make it a good candidate. But, as Macquarie Securities research analysts point out Monday in a report, that’s also fairly unlikely:

In our view, the only possibility could be Samsung which is expanding its PC business aggressively and has a strong balance sheet. The acquisition could benefit from potential synergies – scale, branding and digital home. However, we think the probability of Samsung acquiring HP’s PC business is still very low as Korean companies have very low track record acquiring foreign companies in the past.

Rather, it’ll likely be spun off into a standalone company, but there will be plenty of disadvantages to that scenario as well, according to Macquarie. For one, the spun-off PC business would no longer benefit from extra marketing oomph from HP’s (far more profitable) printer business, or its services business. Plus, it will be a much smaller company, and that will give opportunities to current HP competitors to take some of the company’s market share, in Europe (such as Asustek and Samsung), and here in the U.S. (Lenovo).

A separate HP company selling PCs also brings a whole new set of questions that need to be tackled — who will be put in charge? How will these PCs be differentiated from any of its competitors? How will webOS be utilized? And that’s on top of a question the whole industry, or at least those not named Apple, are struggling with: how to turn a decent profit on a commoditized product like the PC.

Thumbnail courtesy of Flickr user roland

  1. If HP is serious about the software/services business, it would spin the PC business out along with WebOS and the PRINTER business. The printer business will be a major distraction in its quest to become a second IBM. The printer business is also a good way to make the PC business viable.

  2. Yup probably will be no buyer at good enough price because tablets and smartphones are already dominant in consumer space and will also become dominant in the enterprise in 3 yrs.

  3. Given this decision, and the chance of a fire sale price for the PC division, is the Compaq purchase likely to be considered a success, or a failure?

  4. There is a perfect candidate to buy HPs computer busines and that is Microsoft
    Trap that’s right Microsoft, now before you say I am crazy slow down and think a minute. Imagine that microsoft purchased HP as a way for them to keep the windows platform relevant. Let’s say Microsoft completely reverses their stategy and stealing another page out of Apples playbook. They design and build ( they have some very talented hardware designers already) a quality PC the way it is supposed to be built showcasing the best of their technology , displaying them in their own Microsoft stores and vertically intergrating them with phone, music, gaming just like Apple. Microsoft could simplify HPs line and take advantage of HPs extensive retail channel to place a high quality machine in the publics hands and go face to face with Apple in advertising. They build a powerful machine for enterprise businesses to compete there with Oracle with Sun utilizing service and support. When they are ready to move into Windows 8 they are in a position to transition large corporations into that new platform instead of risking loss of those customers to
    Sun or Apple.

    1. yeh and how long before they end up in an antitrust battle

  5. There is a perfect candidate to buy HPs computer busines and that is Microsoft
    Yeap, that’s right Microsoft, now before you say I am crazy
    slow down and think a minute. Imagine that Microsoft purchased HP as a way for them to keep the windows platform relevant. Let’s say Microsoft completely reverses their stategy and stealing another page out of Apples playbook. They design and build ( they have some very talented hardware designers already) a quality PC the way it is supposed to be built showcasing the best of their technology , displaying them in their own Microsoft stores and vertically intergrating them with phone, music, gaming just like Apple. Microsoft could simplify HPs line and take advantage of HPs extensive retail channel to place a high quality machine in the publics hands and go face to face with Apple in advertising. Microsoft could also build a build a powerful high end machine for enterprise businesses to compete there with Oracle with Sun utilizing service and support. When they are ready to move into Windows 8 they are in a position to transition large corporations into that new platform instead of risking loss of those customers to Oracle or Apple.

  6. PC makers are envious of Apple’s ample margins. Acer’s board dumped their CEO because they wanted higher profit margins.

  7. Pickup a Touchpad, Xoom, Galaxy Tab and iPad.

    One of those easily has the worst build quality. Try to guess who =op

  8. MarkWolfinger Tuesday, August 23, 2011

    Sell it to Carly Fiorina.

  9. ” How will webOS be utilized? ”

    It won’t be. Period.

  10. Is HP losing? Just worried where I will buy my ink; I’m using HP printer and if their making a huge sale out of their products, there is indeed something wrong.

    shaw capital management

  11. I don’t know about you people but I do believe PC is still a player in the market because of vice versa advantages of PC in Hand held or mobile devices. Think about it do you think in a business office it will replace pc day to day task, for a hand held devices/mobile devices. like word processing, electronic spreadsheet, presentation making, video editing, CAD systems and many more…. if you were thinking like that, then your too stupid to use smartphone to do those things for you….

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