HP's Whitman says 'no plans to break up the company'

IDG News Service - Hewlett-Packard's CEO has dismissed persistent rumors that the company might break itself up in a move that could create more value for shareholders.

"We have no plans to break up the company. I feel quite strongly that we are better and stronger together," Whitman said on HP's quarterly earnings call Thursday, responding to a question from an analyst about the company's plans.

Rumors that HP might break itself up have persisted since former CEO Leo Apotheker said two years ago that HP might sell off its underperforming PC business. HP later replaced Apotheker and said it would keep the division.

One rationale for a break-up is that HP's shareholders would get more value if more profitable parts of the business, such as the printer and services divisions, are separated from other divisions.

Earlier in the earnings call, Whitman went out of her way to say HP is committed to its personal systems business, which includes its desktops, laptops and workstations, as well as the nascent tablet business HP is trying to grow.

"I truly believe this is a business we need to be in for three reasons," Whitman said.

One is that "no one understands computing like HP, from the data center to the device," she said. The second is that "the future is convergence. As the complexity of the computing ecosystem goes up, our ability to bring all the pieces together becomes a competitive advantage."

The third reason is that security concerns are increasing, and HP "understands how to balance access and security," she said.

"It's going to take us time to get back on track, but we've made significant progress over the past year" with new hardware designs and "multiple operating systems that are going to give us the flexibility to meet a variety of customer needs," Whitman said.

Still, it's not clear HP can react quickly enough to take advantage of the fastest-growing segment of the PC market -- tablets -- or that it can become a player in smartphones, a market it gave up on under Apotheker but now says it will re-enter.

"The pace of these shifts [in the market] is actually accelerating," Whitman said.

The PC business is a tough one to be in, and in the short term its prospects look bleak. HP reported a drop in sales and profits for the quarter just ended, partly due to an 8 percent sales decline in its personal systems group. That business was weaker than HP expected in the quarter just ended, and Whitman doesn't expect it to improve this fiscal year, she said.

Dell also reported a drop in PC sales this week, and Michael Dell is trying to take the company private so he can work on building out more profitable businesses away from the intense scrutiny of Wall Street.

Over the past 10 years, HP has built "the most valuable franchise in IT," Whitman said.

"When you think about our brand, our scale, our distribution, our go-to-market, collaboration on R&D and supply chain, I think we've got a great set of assets," she said.

"Importantly, customers want this company to be together, and we heard that loud and clear on Aug. 18, 2011," Whitman said. That's the day HP said it was considering a spin-off of its PC business.

Still, HP will eventually have to show its shareholders that "better together" is the right strategy, something Whitman alluded to on the call.

"Over time, the business performance has to underscore the value of better together," she said.

James Niccolai covers data centers and general technology news for IDG News Service. Follow James on Twitter at @jniccolai. James's e-mail address is james_niccolai@idg.com