HP U-Turn: Holding On To PCs

“It wasn’t going to work.” Thats what HP CFO declared yesterday, as the giant confirmed it will be holding on to its Personal Systems Group (PSG). The U turn on the shock decision by former boss Leo Apotheker that the world’s No.1 PC maker was to spin off its ,still profitable, PC group leading to outcry in the industry.

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“It slowly but surely became very clear that the math just wasn’t going to work on this one,” said Cathie Lesjak, HP chief financial officer, in an interview.

Spinning off the business would have set Palo Alto back around $1.5 billion including loss of branding and reduced purchasing power.

“HP objectively evaluated the strategic, financial and operational impact of spinning off” the PC business worth $40.7bn, Meg Whitman Hewlett Packard CEO said in a statement yesterday, confirming the decison reversal.

Keeping the PSG group “is right for customers and partners, right for shareholders, and right for employees.”

“H-P is committed to PSG, and together we are stronger,” she added.

There was also the “depth of the integration that has occurred across key operations such as supply chain, IT and procurement” to be considered the statement also said.

Former boss Leo Apotheker got the boot after the controversial decision met ire of analysts and former ex eBay Chief Whitman took the reins in September to sort directionless HP out.

The successful head of HP’s PC group, Todd Bradley, was even unaware of the controversial decision until just before it was announced, it has also been revealed.

Whitman recently gave hints of her thinking talking about “deep-rooted legacy” which she (along with Exec Chairman, Ray Lane) wishes to maintain and build on, in an e-mail sent to staff.

Markets rejoiced at the announcement, shares closing up 4.82 percent to $26.99 in close yesterday.

“It never made financial sense to spin the PC division out,” analyst Rob Enderle of the Enderle Group told MarketWatch.

“It probably would have ended up in a very unprofitable situation and Whitman was right to reverse the decision.”

The move “should probably stop a lot of the bleeding.”