August 20, 2011
The penny finally drops for HP as it prepares to drop the PC business
As for PCs overall, they remain a huge if slowly-declining market. When HP leaves the gap will be closed and life will go on. Whilst competition now takes many forms (smart phones and tablets for starters) there remains a need for the traditional big box and monitor, but at low-cost and low margin. We should also expect to see further aggregation into a smaller number of PC makers catering for the mass market as well as a continued splintering into smaller, more profitable niche markets at the top end.
The purchase of Autonomy, which was founded in 1996 and makes software for companies to search and manage huge databases, fits the strategy of “building a successful software business,” he said.
“Autonomy brings to HP higher value business solutions that will help customers manage the explosion of information,” he said.
“Autonomy has an attractive business model, including a strong cloud based solution set, which is aligned with HP’s efforts to improve our portfolio mix.”
Technology analysts said HP’s decision to abandon its PC unit recalls that of US computer giant IBM, which sold its PC business to China’s Lenovo in 2004 for $1.25 billion.
Gartner analyst Mark Margevicius cautioned, however, that “we’re not in an era when the PC is dead.
“The PC market is flat but it’s still a huge business,” Margevicius said.
It remains HP’s largest single revenue generator, but it “just doesn’t produce all that much profit,” he said. “The PC market has transformed into a tactical, commoditized business.
“HP, as a vendor, has many, many things within its coffers to sell to its customers. It sells services, it sells online stuff, it’s got networking stuff, it’s got software,” he said.
“It’s got all kinds of other things that from a business point of view make far better margins and profit than does the PC business,” Margevicius said.
“If the PC business was a business that generated 20 percent margins, HP’s not dumping their PC business,” the Gartner analyst said.