The 5 Divisions HP is Most Likely To Sell

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<p><font size=”5″><strong>The 5 Divisions HP is Most Likely To Sell</strong></font></p>
<p><font size=”2″> <font size=”4″><font size=”2″>Austin Business Journal by Jon Xavier, Web Producer </font><br />
Hewlett-Packard’s latest yearly report included a new phrase that suggests the company might be looking to sell some of its underperforming assets.<br />
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“We also continue to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives,” HP wrote in its annual 10-K briefing to investors and the SEC.<br />
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If HP, which employs thousands of people in Austin, were looking to sell, what might be on the block? CEO Meg Whitman and Co. are playing mum when it comes to specifics, but one need only look at HP’s balance sheet to see what the real dogs are. Based on financial performance, here’s the five units the company might want to get rid of.<br />
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Autonomy<br />
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Obviously, when we’re talking about “not meeting objectives,” nothing even comes close to Autonomy. HP was forced to take an $8 billion writedown on its $13 billion acquisition of Autonomy just a year after the deal went through. Fraud allegations on both sides aside, the fact remains that basically none of the synergies between the two companies that made the deal make sense have materialized, and HP hasn’t been able to realize much revenue from the merger. Further, Autonomy is basically a hangover from the strategy of Leo Apotheker, who wanted to take the company in a completely different direction than current CEO Whitman.<br />
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There’s just one problem, though: in order to make a sale, you need a buyer, and HP has already broken the cardinal rule of salesmanship: Never talk down your merchandise. After spending the past few months caterwauling about what poison the enterprise search business is, HP might find Autonomy to be a hard sell.<br />
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Personal Systems Group<br />
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The Personal Systems Group, which makes PCs, workstations, tablets and other devices, is without a doubt one of the biggest black marks on HP’s balance sheet. While the $35 billion PSG brought in in 2012 represented the largest single chunk of HP’s revenue, PSG is also the company’s most rapidly shrinking business. Revenue fell by 10 percent in 2012, an increase over 2011 when it fell by 3 percent. Looking at it quarterly, the story is even worse: the most recent quarter’s revenue is down 14 percent year-over-year.<br />
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Of course, PSG’s sale has been discussed in the past and found to be a non-starter. Turmoil over the proposed sale might have been one of reasons Leo Apotheker was canned and replaced with Whitman. Whitman’s strategy reportedly puts more of an onus on PSG, since among other things she wants HP to have a tablet and a phone.<br />
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That makes an outright sale unlikely, but HP could still unload the lowest performing bits of the unit. In that case, notebooks and desktop PCs are the obvious targets, having seen their net revenue fall by 12 percent and 9 percent respectively.<br />
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Services<br />
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Services, which provides tech support, IT consulting and outsourcing for large enterprises, is the division that was formed by HP’s $13.9 billion acquisition of Electronic Data Systems in 2008. It’s HP’s second biggest business overall, and it’s in trouble. Revenue is down 3 percent in 2012, and returns were so poor in Q3 that the company had to write off $8 billion of the $11 billion in goodwill from the EDS deal in August. John Visentin, the division’s chief, also left the company around that time. HP was rumored to be shopping the Services division around to private equity firms this summer, a report that it vigorously denied. With things being as they are, it might be time to give that option a second look.<br />
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Printers<br />
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Printers have long been the core of HP: under-the-radar, deeply unsexy, but fundamentally stable, delivering reliable returns year after year. Recently, that’s changed. Net revenue fell 6.5 percent in 2012 driven by “broad-based consumer demand weakness in all regions.” Sales volume was actually down 15 percent, but HP was saved by the fact that what it was selling was mostly on the high end, and per unit revenue rose by 8 percent. Less-than-promising financials aside, selling the printers unit makes sense at a high level because it fits with the direction Whitman has said she wants to take HP. If she’s serious about a mobile-first strategy, printers are sort of an anachronism — nobody needs to print anything from their smart phone.</font></font></p>

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January 8, 2013 at 8:20 AM