Reversing course, Hewlett-Packard to keep PC unit

Hewlett-Packard's new chief executive Meg Whitman, just five weeks into her tenure, said that the company will keep its personal computer division and also resume making tablets. Whitman's announcements were a dramatic repudiation of strategic decisions which led to the ouster of her predecessor, Leo Apotheker, after less than a year at the helm of the world's biggest computer maker. Apotheker, who was fired by HP's board in September, had proposed spinning off the PC unit and stopped production of the TouchPad, HP's rival to Apple's iPad, in a shift towards software and services for businesses. "HP objectively evaluated the strategic, financial and operational impact of spinning off PSG," Whitman said in a statement, using the acronym for HP's Personal Systems Group which makes PCs. "It's clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees," Whitman said. "HP is committed to PSG, and together we are stronger." Whitman, the former chief executive of online auction giant eBay, took over as HP's president and chief executive from Apotheker, a veteran of German business software giant SAP, on September 22. The low-margin PC market has been flat amid an astronomical increase in powerful smartphones and the arrival of hot-selling tablet computers such as the iPad. As part of his strategic shift, Apotheker also announced the $10.24 billion purchase of British enterprise software company Autonomy and a decision to halt production of the TouchPad, which was powered by the webOS operating system HP acquired from Palm. HP's acquisition of Autonomy closed earlier this month. Whitman declined to reveal what HP planned to do with webOS, but said HP would make tablet computers running Microsoft's upcoming Windows 8 operating system. "We need to be in the tablet business," Whitman said in a conference call with financial analysts. Whitman said the company would make a decision on the future of webOS "within the next two months." In its statement Thursday, HP said the PC unit would be "a key component of HP's strategy to deliver higher value, lasting relationships with consumers, small- and medium-sized businesses and enterprise customers." "As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry's broadest portfolio of PCs, workstations and more," said Todd Bradley, the executive vice president of HP's Personal Systems Group. "We intend to make the leading PC business in the world even better," he added. Bradley, who was also on the conference call, said tablets were helping to usher in a "new age of personal computing" and it was "not too late" to get into the market dominated so far by the iPad. Shares in the Palo Alto, California-based HP plunged 20 percent on August 19, the day after Apotheker announced the possible spinoff of the PC unit, and lost 40 percent of their value during his tenure. "We confused the market pretty dramatically on August 18," Whitman conceded Thursday. HP shares rose 0.52 percent to $27.23 in after-hours trading after gaining 4.82 percent on Wall Street on Thursday.