Customers may think twice about HP as PC business looks uncertain

As HP announces a major shake-up of its product range and services, analysts warn customers could think twice about HP contracts as a result of uncertainty surrounding its PC business.

As HP announces a major shake-up of its product range and services, analysts warn customers could think twice about HP contracts as a result of uncertainty surrounding its PC business.

HP has announced it is to ditch its Touchpad tablet range and seek a buyer for its PC division, while confirming its acquisition of UK software company Autonomy for £7.1bn.

HP said it will examine strategic alternatives for its PC business over a 12- to 18-month period, which could lead to the division being separated, spun-off or sold.

Ranjit Atwal, Gartner research director, said from a business perspective, the separation of the PC division from the enterprise business could create reluctance among customers to sign up to long-term deals with HP. This is because of uncertainties surrounding the longevity of products and software.

"Customers will be reluctant to go down the HP path unless it resolves what it's doing with its PC business. The changes create uncertainty in an environment that is already uncertain. Any business looking for stability will think twice about HP," said Atwal.

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He added that HP had decided to focus attention away from the low-margin, commodity PC business.

"Enterprise is where they're looking to focus. HP tried to build PCs into that but found it difficult to build a complete end-to-end solution. HP maybe thought the PC could be sacrificed. It tried to move into devices, tablets and smartphones and it's given up on it," he said.

In the face of HP stopping the production of hardware that uses its operating system (OS) webOS, Atwal said HP had fallen "flat on its face". He said it lacks a strong ecosystem of mobile applications, which failed to provide differentiation in the market.

"It's like having a TV without programmes. They launched the Touchpad but didn't have the content," said Atwal.

Other analysts predict Lenovo could be a potential takeover candidate for HP's PC division.

Eszter Morvay, research manager in IDC's European personal computing team, said Lenovo looks like a strong possibility for a purchaser.

"Lenovo has been on the global rise for the past five years, especially with acquisitions. It has the know-how and experience in incorporating a business model like they did with IBM's ThinkPad."

Morvay added that Lenovo and Dell could gain from HP's transformation plans in the short-term. "HP has to re-assure the market, channel and customer because short-term turmoil could be a major advantage for Dell and Lenovo," she said.

Morvay said HP will have to work with any potential buyer of its PC business on large future and existing deals.

Ovum analyst Nick Dillon said HP is unlikely to find licensees for webOS, but the platform could offer a tempting purchase for handset-makers looking to move away from a reliance on Google or Microsoft, such as HTC.

Dillon said HP had made an opposite move to Google - which announced plans to buy Motorola's handset division, Motorola Mobility this week - in moving out of hardware into services and software.

"In doing so, HP will no longer be able to control the access to its services, leaving itself at the mercy of other platform and hardware providers, many of whom also have competitive services and software," he warned.

What to consider if HP sells its PC business and acquires Autonomy

Clarence Villanueva, analyst at Forrester, advises customers in the light of HP's intentions to sell its PC business and acquiring Autonomy:

1. If you're crafting a PC refresh request for proposal (RFP), ask HP how contracts will be maintained. The spin-off brings new risk to your HP contracts. Though there is no official word yet on how contracts will be handled, your HP enterprise purchasing contracts may or may not remain the same. You may also want to understand how spare parts will be made available for your HP devices, after the spin-off-will that be through HP? The new spin-off? You should also understand any changes to warranties and after-sale services through the RFP process.

2. If you're a current (or soon-to-be) Autonomy customer, get your licences in check. From an audit perspective, ensure you're in compliance with your licences before HP targets you. Though HP may not be as proactive in auditing its customers as others, acquisitions make it more likely for them to take advantage of implementing new licensing schemes, challenging your existing licence ownership.

3. Ask your resellers for discounted HP webOS tablets. HP will discontinue its TouchPad operations. But beware - don't expect they'll be able to service them (or provide any OS updates) if you have any issues.

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