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Interview with faculty member Dr. Peter Otto

HP will withdraw from the computer and tablet PC market
Interview with faculty member Dr. Peter Otto on Hewlett Packard after their announcement to exit the PC- and tablet computer business.

1. HP announced its exit strategy, giving up the PC business. How smart is it, to give up tablet computers and smart phones?
Giving up the tablet and PC business, enables HP to focus on value-added services such as IT outsourcing and the enterprise software market with the acquisition of the British enterprise software company Autonomy for $10.24 billion. The PC and tablet computer business is a high volume low margin commodity market, as opposed to the enterprise software and IT service market, where companies such as Oracle, SAP, or IBM realize healthy profit margins. HP is refocusing its business strategy to compete in this high margin market and as such it seems to be a smart move to give up the PC business.

2. HP made one third of its turnover in the PC business. How should HP presumably compensate this loss of substantial income?
The market for enterprise applications and IT services (e.g. cloud-based computing or software as a service) is growing steadily, as companies’ need, more than ever, applications to manage the glut of data to keep track on customers and markets. The acquisition of the software company Autonomy will enable HP to capitalize on the higher value business solutions.

3. If the PC market is in a downturn, who would buy HP's PC business?
Given the fact that the PC market is a high volume and low margin business, it is foreseeable that a potential buyer for HP’s PC business will come from Far East. It could be one of the OEM manufacturers, for example ASUS, which is well positioned to absorb such a take-over. Alternatively, a smart phone manufacturer, like HTC, could buy HP’s PC business to extend its line of products.

4. HP's is now focusing on software solutions and services. The right step to a bright future?
The market for cloud applications is going to increase from about $41 billion in 2011 to $241 billion in 2020, according to new estimates from the research firm Forrester. And by 2015, managed application services are predicted to grow at a CAGR of 26.2 per cent. HP will be well positioned in both of these markets. It was for IBM the right step to get out of the PC market so I predict HP will be equally successful in shifting the focus to software solutions and services. 

Dr. Peter OTTO, M.B.A, Ph.D. is Visiting Professor at the Lorange Institute of Business Zurich and Associate Professor, School of Management, at the Union Graduate College in Schenectady, New York

On November 14 and 15 he is teaching at Lorange Institute of Business Zurich:
14/11/2011 - 15/11/2011: Social Media and Online Collaboration. Enroll now!

Read a longer version of the interview on our blog.
Published: 20/09/2011
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