Samsung may exit PC business, split in two

The struggling firm is looking to ditch its losers, one of which is PCs.

samsung notebook 9 pro
Gordon Mah Ung

Samsung, a company so massive it accounts for 20% of South Korea's gross domestic product, is in the midst of a struggle that could see it split into two companies and ditch its PC business.

The International Business Times reports that Samsung is in negotiations with China's Lenovo Group to sell the PC division for approximately 1 trillion won, or $850 million. How much Samsung makes from its PC business is unknown.

Samsung is already in retreat in the PC space. It stopped selling PCs in the European market in 2014, citing competition from HP and Lenovo. It also cut back in the U.S. for a time but has recently revamped its efforts. As it is, it never registers a blip on the quarterly sales figures from IDC and Gartner.

That doesn't mean it doesn't have some nice hardware. The Galaxy TabPro S is a beautiful Windows 10 2-in-1 with numerous awards and accolades, including a Best of CES award. It also has a decent array of laptops and desktops, but they don't seem to be catching on.

Lenovo, on the other hand, has risen to dominate the PC market with stylish designs and a little help from IBM, which sold its PC division to Lenovo in 2005 and continued to sell ThinkPads to corporate customers. According to third quarter numbers, Lenovo was the number one PC vendor with 20.9% market share, with HP right behind it at 20.4% market share. Grabbing Samsung should inch it further along, but not by much.

The PC business sale news comes amidst a bigger news item, that Samsung is being pressured to split itself into two companies. The company is under pressure from U.S. hedge fund Elliott Management, which owns 0.6% of the company, to split the company in two and provide more in payouts. In doing so, it would pay out a special dividend of 30 trillion won ($26 billion).

With that kind of dividend it's not hard to see why Elliott wants the split, but such a move would also allow the Lee family which founded the firm to increase their control over the company. Jay Y. Lee (aka Lee Jae-yong) took over control of the company from his father Lee Kun-hee in 2015 and has been refocusing on its core assets while dumping underperforming divisions.

Samsung sold its printer division to HP earlier this year, and now the PC group is on the block. Obviously the company wants to get rid of dead weight ahead of such a split.

They are also not in the strongest of positions to resist the push. Samsung has been reeling from some PR disasters as of late, most notably the exploding batteries in the Galaxy Note 7. Then there was the exploding washing machines, which got less coverage but still left the company red-faced none the less.

The offices of Samsung were raided earlier this month as part of an investigation involving a political scandal involving South Korean President Park Geun-hye and her friend, who is alleged to have exerted improper influence in state affairs. The search was related to whether Samsung may have improperly provided financial assistance to a daughter of the president's friend, Choi Soon-sil, according to the South Korean news agency Yonhap.

What Lenovo would do with the Samsung division is unclear. Lenovo has a tremendous product line for business users (ThinkPad) and consumers (Yoga). Picking up Samsung would give it a little more consumer business, and that's about it. Samsung is not a player in enterprise IT, which is a shame because the TabPro S is a fine piece of hardware.

Copyright © 2016 IDG Communications, Inc.

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