HP Plans To Spin Off PC Business

Robert Siegel talks to The Wall Street Journal's Ben Worthen about Hewlett-Packard's decision to spin off its P.C. business. The company will also stop selling tablets and smartphones to move more toward analyzing corporate data.

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MELISSA BLOCK, host: This is ALL THINGS CONSIDERED from NPR News. I'm Melissa Block.

ROBERT SIEGEL, host: I'm Robert Siegel. And it's time now for All Tech Considered.

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SIEGEL: The big news in Silicon Valley broke last Thursday. Hewlett-Packard, which sells more PCs than any other company, is thinking about selling off its PC division. Last year, 18.5 percent of all PCs sold were made by HP - 64 million of them. So why is Hewlett-Packard thinking about getting out of a business in which it is the global leader?

Well, we're going to ask Ben Worthen of the Wall Street Journal. Welcome to the program.

BEN WORTHEN: Thank you for having me.

SIEGEL: Ben, it's tempting to see Hewlett-Packard's announcement as confirmation that the era of the personal computer is over. But HP is also talking about getting out of the tablet business and the smartphone business. What's going on here?

WORTHEN: Well, for HP, you're right. They're the world's largest maker of PCs, and it's a good business but it's not a great business anymore. It contributes $40 billion in revenue for the company, and that's $2 billion to its bottom line. So this is a good business. The problem is, is it's getting a lot tougher to make money.

The computers themselves are getting cheaper, which means that if you can shave 10 percent off of your costs, back when you could sell a computer for $2,000, that was a lot of money. But now when a computer costs $300, it's not really that great. And also, tastes for consumers are moving increasingly to things like smartphones or the iPad.

And as you noted, Hewlett-Packard is getting out of those businesses, too. They launched, a short while ago, their own types of products in those categories, and they haven't caught on. And so they're pulling the plug.

SIEGEL: Hewlett-Packard has also just bought a British software company, Autonomy, for over $10 billion. Why? What's the plan there?

WORTHEN: Well, it's part of HP's bigger plan. So when they said that they're getting out of the PC business, or intending to, the thing that goes along with that is they're going to take whatever proceeds they can get - either from spinning off or selling the PC division - and they're going to try to reinvest it into the rest of the company.

Now, for HP, the rest of the company is a lot of products that they sell to businesses - software, consulting services, and back- office equipment and gear that big companies buy. Autonomy makes a kind of software that helps businesses find the information that's stored in there. It's basically Google for businesses. And they think that that's a big, growing business.

Software tends to be more profitable than computers. It's the sort of product that you can build it once, write it once, and then sell it over and over and over again. And moving forward, I think we should expect HP to try to buy more software companies, to expand its products there and to target businesses much more than it does consumers.

SIEGEL: You know, it's intriguing and a little humbling to look at the things that have come down in price that Hewlett-Packard makes for personal computers and printers. Something that doesn't come down in price is the ink inside those printer cartridges. And I gather it's a big business for them.

WORTHEN: That's a very big business for HP. And in the printing division - you know, PCs and printers, they're both commodities. You know, I think as a consumer, if you're buying a computer, unless you're talking about a Mac, there isn't a huge amount of difference. And the same with a printer; a printer is a printer. But it's a cash cow for HP. They make tons of money off of that and selling those ink cartridges, in particular.

And they have no intention of getting out of that business, even though you would think it would have a similar type of dynamic as the PC business. I think they're going to keep milking that cow for as long as they can.

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SIEGEL: Ink is good business.

WORTHEN: Right.

SIEGEL: Ben Worthen, thanks so much for talking with us.

WORTHEN: Thank you for having me.

SIEGEL: Ben Worthen covers the technology industry for the Wall Street Journal.

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