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October 28, 2011

MW Tracker Spotlight

HP to Keep PC Business: Whitman Empowers Management to Lead  
"At the end of the day, the costs and the risks of a separation were simply greater than any valuation we could create," noting that the choice to keep the PC business was based on an intensive five-week analysis by 18 teams of employees. "I feel great about the decision."  -- Meg Whitman, CEO - HP

Martin Wolf Analysis
  • This is the right decision and keeps value in the traditional channel.
  • HP is the best firm to leverage the PC business.
  • Dell will be the least to benefit from this decision.  
  • The margins for the PSG group may be under pressure, and at a 5.7% operating margin are the lowest operating margin business segment at the company. But the risk of removing it froHP Logom HP's business model was too significant.
  • If spun off, the impact on channel partners would have been significant:
    • Costs would have been high for the channel partners due to the linking of PC/Printer/Enterprise Storage, Servers, and Networking (ESSN); and 
    • The spinoff would have added costs to channel partners, damaged the relationship and caused an imbalance for the channel partners who typically balance across PCs and Servers
  • Ignoring the one-time charges of $1.5B and $1B annually, HP benefits due to the PC unit's integration into its overall business model.
  • HP's low pricing is one of its strengths in the server business. At a similar cost structure the operating margins of HP are lower, which means the channel partners are also operating on low margins. So for a channel partner to make money from an HP relationship, they need the breath of products across printers, desktops, laptops etc.
  • HP still sells more PCs than any other vendor, shipping 16.2 million PCs last quarter, which equates to 17 percent of the market.
  • Meg Whitman displayed strong leadership by making such an important decision quickly. This fills the vacuum in HP leadership and provides confidence to the market and Wall Street.
  • We believe this CEO change is positive and hopefully is an indication of how Ms. Whitman will manage quickly, decisively, and clearly.
  • The key now is for HP to continue showing strategic vision to minimize the damage that it caused with uncertainty for its customers, channel partners, and investors.

Press Release:

Please click here to read the press release.  


To learn more about this transaction or our firm, contact Yousif Abudra at  or (925) 215-2760.   

About Martin Wolf  


Based in Silicon Valley, Martin Wolf is a leading middle market M&A Advisory focused on companies with services-based business models. Since 1997, our team has completed more than 100 transactions in six countries. We are a five-year member of the Merrill Lynch PS Referral Network, and were selected as ICICI Bank's (India's leading private bank) exclusive strategic partner for acquiring U.S. IT companies. For more information, visit


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Please click here to view the announcement. 


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Please click here to


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Please click here to read more.

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Tim Mueller
Tim Mueller
He is not only a Principal at our firm, but was a client in 1999 when Martin Wolf sold his business.