HP Strategy Leaves Opening for Apple, Dell: Analysts

 
 
By Nicholas Kolakowski  |  Posted 2011-09-01 Email Print this article Print
 
 
 
 
 
 
 

Hewlett-Packard's choice to abandon manufacturing PCs could have some very negative ramifications, according to analysts.

Hewlett-Packard's plan to spin off its Personal Systems Group, its PC manufacturing arm, could damage the company's position with small to midsize businesses, according to a pair of analysts.

"Our prognosis is that without PSG, HP's value proposition will be much weaker in SMBs," Sanjeev Aggarwal and Laurie McCabe, analysts with the SMB Group, wrote in an Aug. 31 research note. "PSG not only provided an entr??«e to upsell servers and services, but has been, for all intents and purposes, HP's major marketing arm and -voice' to these businesses."

In addition, they added, HP's sudden shift could open the door to SMBs reconsidering their relationship with the manufacturer: "When HP hands off its PC business, both SMBs and HP VARs that serve them-many of whom are small businesses themselves-will have the opportunity to rethink whether they want to or should stick with HP on the server side."

Apple and Dell could benefit from the vacuum created by HP abandoning the PC scene. As it exits hardware, HP has been shifting its focus onto software and services, where it will face some aggressive competition from the likes of Oracle and IBM.

Besides shedding its PC manufacturing business, HP has also terminated its TouchPad tablet and smartphone initiatives, although it revived the former for a limited-production run after consumers began snatching up the devices at a greatly reduced price. Both the TouchPad and smartphones run webOS, the operating system HP acquired along with Palm in 2010. 

Flooding the market with additional TouchPads could boost the value of webOS if HP decides to sell off the asset, according to an analyst. A "larger installed base of TouchPad and webOS devices should increase the value of webOS in a potential sale," Sterne Agee analyst Shaw Wu wrote in a research note widely circulated on Barron's and other financial Websites. "We believe logical buyers may include Samsung Electronics, Research In Motion, HTC, Amazon.com, Facebook, Sony, Microsoft and others."

The first weekend after HP announced it would kill the TouchPad, Best Buy and other retailers slashed the price of the 16GB tablet from $399 to $99, and the 32GB edition from $499 to $149. That came on top of the $100 discount instituted by HP at the beginning of August, which drove the sticker price for the TouchPad down from $499 and $599, respectively, for the 16GB and 32GB models. HP's own Website also lowered the entry price to $99.

The ensuing rush of customers was enough for HP to revive the tablet, zombie-style, for one last go.

"Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand," Mark Budgell, an HP spokesperson, wrote in a corporate blog posting Aug. 30. "We don't know exactly when these units will be available or how many we'll get, and we can't promise we'll have enough for everyone." 

In the meantime, HP evidently has some very big issues to worry about.

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Nicholas Kolakowski is a staff editor at eWEEK, covering Microsoft and other companies in the enterprise space, as well as evolving technology such as tablet PCs. His work has appeared in The Washington Post, Playboy, WebMD, AARP the Magazine, AutoWeek, Washington City Paper, Trader Monthly, and Private Air. He lives in Brooklyn, New York.
 
 
 
 
 
 
 

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