HP's stock plunges 20 percent on Friday

HP's stock price took a huge hit on Friday after announcing on Thursday afternoon it was dumping its webOS business. CNBC.com shows that HP's stock on the New York Stock Exchange plunged just over 20 percent on Friday and was likely one of the big reasons why the NYSE was 1.73 percent lower today overall. The stock price was the lowest HP has had in six years. In addition to discarding its webOS business, HP is also considering a sale or a spin off of its huge PC business, which is still the single biggest seller of PCs worldwide.

Both of these moves by HP are clearly spooking investors who might feel that the company has now lost its way. The Wall Street Journal reports that Needham analyst Richard Kugele has downgraded HP to underperform, saying, "HP may have eroded what remained of Wall Street's confidence in the company and its strategy. We can't help but get the sense that these dramatic moves are being made from a position of weakness and not strength, and have an air of desperation to them."

In the near term analysts believe consumers might be thinking twice about purchasing an HP PC for things like school, college or for the holidays due to HP's uncertain future in the PC business. However the company is still holding on to its server business . It is still the biggest seller of servers in the world, selling more than the next two highest server providers, Dell and IBM, combined.

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Consumers should think more than twice before buying HP. How soon do you want to end up with a piece of unsupported hardware? You consider 90 days acceptable; but, for me, I expect a higher end laser printer and scanner to have full driver support for at least 5-6 years.

sask said,
Eventually companies run out of growth potential. Even Google will fall one day.

Technology changes every day, Google has their hands in many things and I do not believe that they will run out of "growth potential" unless they refuse to change when they need to.

sask said,
Eventually companies run out of growth potential. Even Google will fall one day.

That isn't the problem, the problem is that the PC division is barely making money (and at times losing it) - if they were making money, growing at a modest 5-8% per year then it wouldn't be a growth centre but it would be a reliable foundation business to fund riskier growth markets.

HP and Dell went down the road of a price war only for it to end up killing the very company who started the war to begin with and yet we have Apple who never entered the price war, plods along at a reasonable growth rate, makes a nice profit off each machine and thus able to fund any expansion without problems.

When you have a race to the bottom, as HP and Dell have done, are you surprised that HP would sell off its PC division?

They are looking to spin off the PC division because it's the trend of any company that came into PCs via the back door or as an ancilliary business - including IBM; head back to the roots. The days of conglomerates (even mini-conglomerates, such as HP is today) are over. Institutional stockholders like pure plays - not diversified companies. However, it's still unheard of for any company to spin off a top-performing subsidiary or division. As has been pointed out, HP is the top dog in PCs - therefore, spinning off a subsidiary in that position sounds crazy. While IBM spun off their PC division (Lenovo), their printer business (Lexmark and Pennant) and even their hard-drive business (which wound up with Hitachi, and is now headed to Western Digital), all three were money-pits (in IBM hands) or, in the case of Global Storage, were problem-plagued (the infamous *Death Star* HDD issues). What worries the market is possible *systemic* reasons for HP to exit at the top - is the PC industry *as a whole* in trouble?

If they're honestly considering a sale or spin off of their PC business, they clearly have a lot going on we don't know about. It sounds desperate.

It didn't go down because of Webos. That was a huge mistake to begin with. It went down because of the PC spin off or sale.

Deihmos said,
It didn't go down because of Webos. That was a huge mistake to begin with. It went down because of the PC spin off or sale.

I think it's a combination. They can't afford to commit to the growth of an industry they BOUGHT into not a year ago... And then are considering selling off or spinning off one of their largest businesses? If they're not near collapse, there's just no excuse for this sort of behavior...

Jaybonaut said,
Anyone know if they are including their printers in this spinoff?
the printers are IPG and should not be technically included with the PSG stuff they're talking about... but it wouldn't surprise me to see such change as well.

asusp5ld2 said,
the printers are IPG and should not be technically included with the PSG stuff they're talking about... but it wouldn't surprise me to see such change as well.

Never had a single issue with an HP printer yet, unlike Epson pieces of garbage.

DUH. If a customer utters the worlds "we are thinking about leaving the PC business" of course their stock is going to go down"

warwagon said,
DUH. If a customer utters the worlds "we are thinking about leaving the PC business" of course their stock is going to go down"

And with no wonder. Stupid / ridiculous statements have a tendency to do that to a company's stock...

Considering that I just bought an HP laptop and dealing with an overheating issue for even the simplest daily tasks because they failed to mention the massive amount of heat an i7 would generate and designing the laptop to ventilate properly. Their solution: update bios and buy a cooling pad. Really?

There's no wonder why they are looking to ditch their PC business. If there is one competitor that I would like to see swallow HP's unit, it would be Asus. They have been making some really good quality computers, both netbooks and gaming laptops, and I think they could benefit from having a stronger mid-range product line for people like me who tend to look for sub-$1000 range multimedia all-around laptops.

BetaAddict said,
If there is one competitor that I would like to see swallow HP's unit, it would be Asus.

What benefit would ASUS get from paying HP a bucket load of money? They are big enough and smart enough to design & build whatever they want with no input from HP.

dvb2000 said,

What benefit would ASUS get from paying HP a bucket load of money? They are big enough and smart enough to design & build whatever they want with no input from HP.

Yeah, ASUS is probably one of the last companies that would need HP really. They build very solid equipment...

M_Lyons10 said,
Yeah, ASUS is probably one of the last companies that would need HP really. They build very solid equipment...

The only reason I could see someone buying the division is if they were able to get a hole of the HP brand itself because otherwise, like you said, ASUS already has the expertise required and are selling solid equipment already.

It reminds of Iron Man, "A weapons company that doesn't make weapons"... It was expected, getting the biggest market in the PC business is a valuable asset in and of itself, to try and do away with it is quite a gamble.

helios01 said,
It reminds of Iron Man, "A weapons company that doesn't make weapons"... It was expected, getting the biggest market in the PC business is a valuable asset in and of itself, to try and do away with it is quite a gamble.

Yeah, the only difference is HP's not as cool as Iron Man... lol

helios01 said,
It reminds of Iron Man, "A weapons company that doesn't make weapons"... It was expected, getting the biggest market in the PC business is a valuable asset in and of itself, to try and do away with it is quite a gamble.

Yeah, the only difference is HP's not as cool as Iron Man... lol

Spending 1.2b on a strategic investment, and then throwing it away less than a year later doesn't exactly inspire confidence... I can't say I disagree with the investors.

greenwizard88 said,
Spending 1.2b on a strategic investment, and then throwing it away less than a year later doesn't exactly inspire confidence... I can't say I disagree with the investors.

I know, right? I'm just baffled by this. How bad are HP's financials that they couldn't commit to an investment whatsoever? And to then consider selling or spinning off their PC business?? I'm really wondering if HP's going to be the next Motorola...

I LOVE HP servers! They make my life so much easier. It's no secret why they're #1 in that market. IMHO nobody comes close to their hardware, features, and support. Dell and IBM dont come close in my experience. Unfortunately HP doesn't fare as well in the other markets. Must be different R&D or different engineering groups or simply because it's usually IT Pro's handling servers where just about everyone gets their grubby paws on desktops & laptops to screw them up then publicly bash the manufacturer not realizing they're the ones guilty of breaking the machines. But that goes for any major computer equipment manufacturer these days.