Mass retrenchments are tipped at Hewlett Packard both in Australia and overseas, as shares in the global IT Company got wiped out at the weekend. Already the Companies new Web OS Tablet is selling for $99 with Harvey Norman set to give over 1200 customers their money back a week after the device went on sale in Australia.
Investors abandoned Hewlett-Packard after it said it is looking to sell or spin off its PC business, the world’s largest, as well as dropping its TouchPad tablet and leaving the future of the WebOS business in doubt. HP also agreed to pay more than $10 billion for British software maker Autonomy.
Following the announcements, HP shares plunged 20 percent on Friday to US$23.60, erasing about $12 billion in market value and leaving the stock near six-year lows.
A HP Australia executive said It “does not look good. We were not told officially about the PC division being sold: we read about it on ChannelNews. We anticipate a lot of jobs will go in Australia right across HP. It is not looking good. Management are not telling us the full story in Australia as they also are being kept in the dark”.
In the USA Best Buy is selling the HP TouchPad, which went on sale at Harvey Norman early last week, at the clearance price of $99. During the past 24 hours thousands of shoppers have been searching for the HP Touchpad ever since it was heavily market down to the discounted prices of $99 for the Wi-Fi-only 16GB device and $149 for the 32GB version.
It’s unclear who would be in a position to buy HP’s PC business, the world’s biggest. World No 3 maker Dell would be out of the question on anti-trust issues. China’s Lenovo, currently No 2, might well be interested, as might Taiwan’s Acer, but both would face huge legal, financing and strategic problems.
Any deal would not include HP’s highly profitable printing and imaging business: CEO Leo Apotheker has indicated the company will be hanging on to that.
Despite Apotheker’s efforts to try to streamline its business, HP’s strategy has been sharply brought into question by industry analysts such as MarketWatch’s Dan Gallagher, who said the company’s business and management moves did not please its shareholders.
Gallagher said HP’s moves in a large part reverse a controversial $25 billion deal it sealed nearly a decade ago to acquire PC rival Compaq. At the time, H-P ran into significant opposition from investors and even some objections from its own board.
Heading for high end margins
While HP said it would decide on a course of action soon, completing a spinout could take as long as 12 months, Wall Street Journal sources said. The new company, dubbed “Spin Co.” within HP, would need to assemble a board of directors and the tax implications of a separate entity would need to be worked out.
In an interview, Apotheker said a spinoff could have tax benefits and that PC growth and profit margins were below all of H-P’s other businesses.
Getting rid of the PC business will let HP focus on high-margin software and services, said Basu Mullick, a managing director at Neuberger Berman, H-P’s 25th largest shareholder. But he questioned the abrupt way Apotheker announced the new strategy.
“Their communication definitely is not right, the way that they’re handling it,” he said. “Obviously they don’t talk about it before they do it.”
The Australian market was thunderstruck by the decision to withdraw the WebOS-powered TouchPad tablet from sale Down Under just four days after its retail launch.
Harvey Norman, who has been seeling HP’s TouchPad tablet for just four days, has abandoned the product. The decision was made after HP announced it would discontinue production of its WebOS Tablet.
At launch, Harvey Norman had exclusive rights to the tablet ordering 6,000 units, of which 1,200 have been sold. Harvey Norman has spent the weekend contacting people who purchased the tablet, offering them a refund or a store credit.
Ben McIntosh, GM of Harvey Norman’s computers and communications division, told media he had notified all HN franchises to withdraw the TouchPad from sale following a meeting with HP Australia.
He said that HP Australia “didn’t have much info” to add to what its parent company announced overnight. “They knew even less than we do,” McIntosh said.
Update: 22/08/2011, 4pm
In a move that matched the US, Harvey Norman has dramatically discounted the HP TouchPad from $499 to $98. Since then, the tablet has virtually sold out in a matter of hours.
Harvey Norman stores were ambushed with consumers looking to purchase the discounted tablet.