In the wake of HP's announcement that it intends to investigate a PC spin off, the company has discovered one of the downsides to being the market leader: It's hard to find a buyer. Samsung has recently announced it has no interest in acquiring HP's PSG (Personal Systems Group). While Samsung's own PC business is quite healthy, with ten million units shipped last year, it's dwarfed by HP's estimated 64 million unit shipments over the same period. Samsung's CEO told Wired: "Based on the significant disparity in scale with Samsung’s own PC
business and the complete lack of synergies, it would be both infeasible
and imprudent to even consider such an acquisition."
Bloomberg TV has an excellent
(if lengthy) segment with Todd Bradley, the head of HP's Personal Systems Group and Palm's former CEO that shows the absurd tightrope the company is now walking with regard to the business unit. Asked what the future holds for the PSG, Bradly responds with:
HP's long-term business strategy for the PSG is presumably out there frolicking amidst the out-of-focus wildflowers
"The future is..extraordinarily good. We're well positioned...our focus has always been profitable growth. Depending on what is decided by the board, we could exit as a Fortune 60 company with over $40 billion in sales, very profitable...and I think a very aggressive force in the market place." Asked to explain why, if the future is so rosy, HP announced its intent to sell the unit now, Bradley dodges with a remark on how the company's lawyers recommended maximum disclosure and transparency. The fact that it's most likely true doesn't make his response any less an evasion; Bradley is stuck explaining how the PSG is performing so well, HP doesn't want it any more
HP's interest in jettisoning the PSG could be viewed as a return to traditional strengths, particularly among investors that opposed the HP-Compaq merger back in 2002. That merger, unfortunately, is part of the reason HP is likely to have such a hard time finding a buyer for its own business unit, no matter how profitable the PSG is. Far from providing a synergystic benefit, the 2001 merger announcement knocked billions off the value of both companies, caused major in-fighting within HP, and took years to complete. The merger was supposed, in part, to guard against precisely the economies of scale and downward pressures that HP now claims have made the segment undesirable.
We suspect HP is going to either have to break the PSG into bite-sized chunks and parcel it out amongst multiple buyers or spin the unit off directly. The company's PC business is simply too large for almost any other company to swallow, and the same long-term economics that HP claims makes an exit strategy a good idea may leave other companies uninterested in a $40 billion-dollar acquisition.