HP Goes Through Metamorphosis – Exiting PC And Tablet Business To Focus on Software, Servers And Services

Hewlett-Packard or HP is going through a period of metamorphosis by radically restructuring its business.  On Thursday, the company said that it is looking to spin off its industry-leading but struggling PC, and the TouchPad tablet businesses. It launched its TouchPad last month with heavy advertising, but it was obvious that it failed to generate a lot of buzz and revenue. The webOS smartphone line is also going through the hatchet.  HP bought the webOS when it acquired Palm few months ago. According to CNN Money,


[t]he move essentially leaves for dead the webOS software HP got by acquiring Palm last year, though the company said it will continue trying to “optimize the value” of its purchase. Though the move was unexpected, it’s not all that surprising: Despite a huge marketing campaign, TouchPad sales struggled so much that HP almost immediately cut the tablet’s price by $100. HP said none of its webOS products reached the company’s internal sales targets.


Meanwhile, HP  is going to buy British software developer Autonomy, a specialist in database search and other enterprise software technologies., for roughly $10.2 billion in cash. This translates to $42.11 per share, giving a 58% premium over the company’s average share price over the past month.


Ideally, PC is working hard to remake the company by moving from PC and the highly competitive tablet business which they tried to copy Apple into software, servers and corporate services. Yet, it is important to know that why the tablet was a huge disappointment,  PC business generates about 33% of the company’s revenue.

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There are many things that do not fall in place here. HP wants to yank up a business that gives it 1/3rd of its revenue. It is buying a new company at 58% premium of its value. It is exiting from a business it just spent millions acquiring few months ago. All these may show that HP does not have strategic vision and could be suffering to define how it wants to take on IBM, Oracle and Apple as the competition continues to heat. There seems to be many things going on at the same time and they do not look well. But time will tell.


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