Hewlett-Packard Pulls a Netflix, May Not Separate PC Division
It's a good month for undoing bad mistakes.
Earlier this week, Netflix (NASDAQ: NFLX) announced that it had cancelled its ridiculous plans to split its streaming and DVD businesses into two separate companies. Now it seems that Hewlett-Packard (NYSE: HPQ) might follow suit.
According to the Wall Street Journal (via Business Insider), Meg Whitman – who recently joined HP as CEO – is reconsidering the company's direction. With $40 billion in total sales and $2 billion in net profit, HP's computer business is not to be underestimated. Sure, the company might produce some of the world's worst computers. But somebody is buying them! Thus, HP might as well continue to manufacture them, even if the costs are too high and the profit margins are too low.
When Leo Apotheker was in charge, he believed that HP could become a stronger company focusing on bigger hardware and enterprise software, just like IBM (NYSE: IBM). But without the PC business, the company's profits would have dropped from $8.8 billion to $6.8 in 2010. That math just doesn't add up.
This might explain why analysts were quick to applaud HP's decision to replace its CEO.
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