Why HP Is Better Off to Sell Their PC Business Than a Spin Off

In my opinion, spinning off HP's PC business as a separate company is bad for 3 reasons:

1. Brand Equity Loss. "HP" means technology and innovation to many people. This iconic company has been contributing to American' technology growth since it was founded in the silicon valley. Consumers and business "dig" HP's PC because the brand means quality and performance. Should HP spins off their PC business, the new company will no longer be recognized as the same as "HP". If brand equity is lost, so does business. Good luck for hoping a Best Buy customer associate explaining to the customers that this X-brand PC is just the same as a HP product.

2. Reduced Cost Efficiency. "HP" as a whole has very high efficiency of leveraging their supply and manufacturing in cost control. When HP negotiates with their suppliers, from component vendors to system integrators (a.k.a. ODM), their suppliers see their business potential in the entire "HP pie". Not only HP has PC business, they also make printers, servers and other system infrastructure equipment. For a lot of their vendors, many of them apply the business strategies of losing money or breaking even at the PC division, and hope for making money from HP's other divisions after "getting their foot in the door". Similar situation exists for HP's manufacturing facilities. However, if HP spins off their PC business, I think HP would keep their high end Server business associated with their software IT solutions (think of Oracle, they bought Sun for their hardware). The result is that the new spin-off company no longer has the same bargaining power in front the vendors and ODMs. They can no longer enjoy extremely low manufacturing costs because the ODMs, like Inventec, Pegatron, Quanta, etc., will now have to deal with HP separately for the high-margin business. Without world-class cost control and manufacturing efficiency, the new spin-off company is deemed for failure competing against Dell.

3. Ever Shrinking Business Potentials. PC is at its middle age. Sad to say, but its market size is shrinking. The once glory days of personal computer are long gone. Spinning off a business with the intention of winning in the PC market is boring and risky at the best. Knowing that the business's future is shrinking, no investor will even dream for the new company to grow, let along fast. The PC industry is highly consolidated due to severe price erosion, and most OEM players are in Asia - Lenovo, Fang Zheng, Tong Fang, Asus, Acer, Toshiba, Sony, Pansonic, NEC, Fujitsu, etc. The last two standing American companies are Dell and HP, while HP has one of its knee on the ground.

HP successfully made the spin-off Agilent. Agilent successfully made the spin-off Avago. But I highly doubt HP will be successful spinning of their PC business. Or if they're successful (i.e. cashing out), the new company may not be successful.

Here is my proposal, should HP's board finally decides to spin-off their PC business, please rename the company Compaq.

Acer Chairman is Wrong - Tablet is Here to Stay and Prosper

According to DigiTimes, Acer chairman JT Wang believes "tablet PC fever" is "cool down". When this story was reported by Slashdot, it was called "Acer CEO Declares a Tablets Bubble". I think Acer's chairman is dead wrong.

I talked that HP made a fatal mistake when the company decided to enter the tablet market. The situation is perhaps better in the Android world because most of other tablet OEMs adapt Google's tablet OS. The combined mass creates a comparable Apps developer community to Apple's. However, just because HP decided to quit the tablet market, it does not imply that the consumer no longer need tablets. And certainly, there is no "tablet bubble"!

Looking at Apple's iPad sales in quantity, the numbers grew quarter by quarter and year by year. Apple is projected to sell 30Mu iPad in 2H'11. There are many out there waiting for the iPad 3 coming with higher resolution, from existing iPad and iPad 2 owners, as well as those "I don't have an iPad" consumers. I believe consumers love and want to buy tablets, at the right price and with iPad-comparable performances. The reason I say so is because in the tablet market, there is only one player dominating with huge profits, Apple. That says market demand is larger than supply, and competitions cannot keep up.

Apple basically caught their competitions by surprise. No one knew Apple worked on the product for several years. After iPad was released, Apple's competitors scramble to follow, but they had much less time for both the hardware and software development. In combination, the final products are offered at comparable prices to the iPad, but with sluggish software performance. Just because the PC OEMs cannot compete, it doesn't mean there is a "bubble". Nobody is throwing money away like crazy as in a true "bubble" situation. And for those who can deliver a tablet fitting consumer needs, there is still plenty of money to be made.

I believe in the next a couple of years, we should see strong contenders to Apple's iPad (3?). I think that pack would be led by a Nokia-made tablet running Windows 8 and a Motorola Mobile-made tablet running Android. For the rest, Samsung, hTC, LG, Asus and even Acer, they should either quit tablet and stay with PC, or become much better in their designs. Just don't call it a "bubble".