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HP Without PCs Will Lose Face With SMBs

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The death of HP’s TouchPad has been chaotic, says Nicholas Kolakowski, but spinning off its PC business will hurt the company more

Hewlett-Packard’s plan to spin off its PC manufacturing arm (called Personal Systems Group, or PSG) could damage the company’s position with small to midsize businesses, according to a pair of analysts.

“Our prognosis is that without PSG, HP’s value proposition will be much weaker in SMBs,” Sanjeev Aggarwal and Laurie McCabe, analysts with the SMB Group, wrote in 31 Aug research note. “PSG not only provided an entrée to upsell servers and services, but has been, for all intents and purposes, HP’s major marketing arm and ‘voice’ to these businesses.”

SMBs will phone Dell and Apple

In addition, they added, HP’s sudden shift could open the door to SMBs reconsidering their relationship with the manufacturer: “When HP hands off its PC business, both SMBs and HP VARs that serve them — many of whom are small businesses themselves — will have the opportunity to rethink whether they want to or should stick with HP on the server side.”

Apple and Dell could benefit from the vacuum created by HP abandoning the PC scene. As it exits hardware, HP has been shifting its focus onto software and services, where it will face some aggressive competition from the likes of Oracle and IBM.

Besides shedding its PC manufacturing business, HP has also terminated its TouchPad tablet and smartphone initiatives, although it revived the former for a limited-production run after consumers began snatching up the devices at a greatly reduced price. Both the TouchPad and smartphones run webOS, the operating system HP acquired along with Palm in 2010.

Flooding the market with additional TouchPads could boost the value of webOS if HP decides to sell off the asset, according to an analyst. A “larger installed base of TouchPad and webOS devices should increase the value of webOS in a potential sale,” Sterne Agee analyst Shaw Wu wrote in a research note widely circulated on Barron’s and other financial sites. “We believe logical buyers may include Samsung Electronics, Research In Motion, HTC, Amazon.com, Facebook, Sony, Microsoft and others.”

The first weekend after HP announced it would kill the TouchPad, Best Buy and other retailers slashed the price of the 16GB tablet from $399 (£246) to $99 (£61) in the US, while UK prices came down to £89.  That came on top of the $100 (£60) discount instituted by HP at the beginning of August. HP’s own site also lowered the entry price.

The ensuing rush of customers was enough for HP to revive the tablet, zombie-style, for one last go.

“Despite announcing an end to manufacturing webOS hardware, we have decided to produce one last run of TouchPads to meet unfulfilled demand,” Mark Budgell, an HP spokesperson, wrote in a corporate blog posting 30 August. “We don’t know exactly when these units will be available or how many we’ll get, and we can’t promise we’ll have enough for everyone.”

In the meantime, HP evidently has some very big issues to worry about.