Updated 3PM Pacific Time.
Hewlett Packard announced Thursday in an earning call that they are planning on exiting the PC market and scrapping the recently acquired webOS smartphone and tablet business in order to focus on enterprise level software and services.
In 2005 I.B.M conducted a similar play as to what HP is planning, spinning off their PC business to Chinese manufacturer Lenovo, in order to focus on the more profitable sector of enterprise level services and analytic software. For I.B.M this was a success as they sold the unit before the market trend of PC assets declining in value began.
HP also announced that they plan to acquire British software firm, Autonomy Corp for $10.3 billion. Autonomy Corp specializes in producing enterprise search and knowledge management applications. This could be seen as HP’s first step in re-branding itself as a provider of enterprise and cloud based services.
CEO Leo Apotheker, who was installed last November, said HP wants to expand their offerings in software and enterprise cloud based services. Apotheker said HP has been trying to reduce its dependence on PCs, as the market is declining rapidly due to the explosive growth of tablets and smartphones.
The Personal Systems Group of Hewlett Packard represents a third of HP’s total quarterly revenue. However margins for the unit have faltered while the profitability of HP’s enterprise-focused services has grown.
This ambitious plan to spin off its PC selling business, and stop producing webOS devices (though still support the software) represents a massive shift for HP. It was ten years ago that HP acquired Compaq for $25 billion to form the largest PC manufacturer, taking that title away from Dell.
In response to the news Michael Dell, CEO of Dell, tweeted “If HP spins off their PC business…. maybe they will call it Compaq?”