Thursday, August 25, 2011

HP's Consumer, Smartphone, and Tablet Businesses Exit Stage Left

In a dramatic move last week, HP announced it is exiting the smartphone and tablet business and putting its personal computer division up for sale, thereby making the business market  HP's core focus.  In many ways this move was inevitable (as IBM successfully demonstrated when it made this transition back in 2004)-  HP's PC division generated the highest revenue, but the lowest profit margin;  the smartphone and tablet business was under tremendous pressure from Apple and Google and it was unlikely that it would catch up or even lead the market in the foreseeable future.  Since HP is the largest tech company by revenue, this transition has broader implications for the tech industry:  Does this mean that tech companies can be too big to compete on multiple fronts?  Is the PC market destined to end up as a low cost commodity?  Is the business market still profitable?  Can a tech company successfully compete in the consumer and business spaces simultaneously?

The bigger issue surrounding HP's transition is the role of acquisitions for tech companies.  HP spent the first decade of this century buying tech businesses at an alarming pace.  The most notable was its acquisition of Compaq Computer, catapulting HP to the top of the PC market.  More recently it purchased Palm and IT consultancy EDS.  One has to wonder if all these purchases were worth the cost, and whether a tech company can build a solid foundation simply with acquisitions, an issue Microsoft has been struggling with lately (Oracle are you paying attention?).  It is too early to tell, but the size and shape of the long-lasting, self-sustaining tech company is still being defined.

Read the article.

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