HP to exit PCs – no need to panic

Computing giant HP has quit the tablet market and says it also wants to leave the PC business. If you’re a customer, there’s no need to panic.

Overnight, the technology world has been shocked by the news that HP, the world’s number one PC-maker, will quit the market. The company is also abandoning mobile devices: the TouchPad tablet (pictured) it launched just a few weeks ago has been dumped, along with a smartphone that never made it to Australia.

Why on earth would the number one PC vendor leave the market?

PCs have become a commodity product with low margins. So even though HP is number one, its PC division is one of its least profitable. Services for big business, and the higher-margin exotic hardware they need, offer better margins.

If I have HP PCs, do I need to worry?

No. Whoever inherits or acquires the HP PC business will almost certainly inherit your warranty too.

What do you mean, “inherit”?

Two options have been mooted for the future of the PC division. One is a spin-off into a new company. HP owns the Compaq and Digital brands, both of which have good PC genes and could conceivably house its PC products.

Acquisition is another option and there is precedent in Lenovo’s buy of IBM’s old PC Division. That transaction should give you heart – the transition was exceptionally smooth.

I was about to buy HP PCs. Should I change my mind?

It’s hard to see how your choice of an HP PC will become more risky. This isn’t a fire sale. It’s a strategic divestment. But it’s probably a good week to screw a salesman on price – life just got harder for the HP sales force and channel, who still have targets to meet and may be a little more desperate to do a deal given that some will worry about uncertainty.

What about my HP printers?

HP will keep its printing business, which is lovely and profitable largely because it gouges us all for ink.

Why did HP fail in tablets?

Everyone but Apple is doing pretty poorly in tablets. Motorola has clocked up fewer than half a million sales for its Xoom, and that’s rated as one of the better tablets. Apple’s selling about ten million iPads a quarter.

HP has never had an enormous or succesful consumer presence beyond PCs and printers. It's tried cameras without enormous success. Perhaps the company just wants to concentrate on the stuff it is really good at.

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