HP to 'Reinvent' Company With Return to Roots

By Dina Bass - Aug 19, 2011 3:19 PM CT

By spinning off Hewlett-Packard Co. (HPQ)'s personal-computer business, Chief Executive Officer Leo Apotheker is shedding a unit the founders never liked anyway.

David Packard only reluctantly agreed to focus on PCs in the early 1990s. And Walter Hewlett, a board member and son of co-founder Bill Hewlett, mounted an unsuccessful campaign to block the 2002 acquisition of Compaq Computer Corp., a deal that vaulted Hewlett-Packard to the top of the PC industry.

From Hewlett-Packard's beginnings in 1939, the company's founders set out to invent one-of-a-kind products and tools for engineers. They never intended to become the biggest provider of a commodity product, said Michael Cusumano, a professor at the Massachusetts Institute of Technology's Sloan School of Management. Now that PC profits are waning amid competition from Asian rivals, Apotheker is poised to return to that philosophy.

"Their DNA never included being a commodity consumer products manufacturer, which is what the PC has become," Cusumano said. "It's certainly not where the action and innovation is in the business these days. They can reinvent themselves. They may have the capability to do it."

While the PC unit accounted for 30 percent of sales last quarter, it only generated a 5.9 percent operating margin. That's less than at any other division in the company.

Hewlett-Packard, based in Palo Alto, California, dropped $5.91, or 20 percent, to $23.60 at 4 p.m. on the New York Stock Exchange, the biggest decline since October 1987.

IBM's Deal

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http://www.bloomberg.com/news/2011-08-19/hp-s-pc-spinoff-would-reinvent-company-with-return-to-roots.html

HP CEO Faces `Uphill Battle,' S&P's Kessler Says

Aug. 19 (Bloomberg) -- Scott Kessler, head of technology equity research at Standard & Poor's, talks about Hewlett-Packard Co. Chief Executive Officer Leo Apotheker's plan to spin off the company's personal-computer business. Kessler speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

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http://www.bloomberg.com/video/74181322/