Why Meg Whitman Changed Her Mind to Save Hewlett-Packard's PCs

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Before she took office as HP CEO, as a board member Meg Whitman supported spinning off the company's PC division, yesterday, she pushed HP in the exact opposite direction. In mid-August, HP announced the discontinuation of WebOS phones, the TouchPad tablet, and maybe its PC division. At the time, Whitman had not yet taken the HP throne, but as a board member she signed off on the decision to explore a spin-off. After taking office, Whitman began to waffle, still holding her position but saying that she wanted to conduct her own analysis, reports The Wall Street Journal's Ben Worthen. Yesterday, she changed her mind completely. 

Whitman holds that she never really flip-flopped because there's a difference between being a board member open to considering a new strategy and a CEO who has to make a final call. "As a board member, I supported the idea of exploring strategic options," Whitman told AllThingsD's Arik Hesseldahl. "This was an idea that had been floated for quite some time. We didn’t wake up this summer and decide to do it, so it wasn’t a new idea. We were looking at this from a real position of strength," she continued. Then, as CEO she did just that. "H-P objectively evaluated the strategic, financial and operational impact of spinning off" said Whitman, explains Worthen. 

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It was only after looking into it, like she promised, that she decided it was a bad move. "And then when I came on as CEO, I asked for a really data-driven analysis, line by line, cost center by cost center, of what the real cost synergies would be, or what the increased costs would be, and what the revenue losses or synergies might be," Whitman told Hesseldahl. It was apparently a very thorough process, "We had 18 different work streams with more than 100 people involved in this, and it was a real tour de force," continued Whitman. And the math ended up being "very compelling." After running the numbers it would've cost the company $1.5 billion just to spin-off, chief finance chief Cathie Lesjak said on a call, noted Worthen. Not to mention other lost "brand value" and "higher overhead costs," notes the New York Times's Quentin Hardy. Earlier reports had calculated a much lower $300 to $400 million price tag.

But Whitman didn't only listen to the numbers, she also listened to the people. After the initial announcement, the tech blogger world expressed its confusion, such as TechCrunch's MG Siegler, who tweeted, "What exactly does HP do now? Just sell printer ink?" Apparently everyone else agreed. "We talked to customers and channel partners, and the feedback was, by and large, that 'you are stronger together,'" Whitman explained to Hesseldahl. "They appreciate the full line of products."

Now Whitman has a completely different tune. She's all about the hardware side of things. "First and foremost, H.P. is a hardware company," Whitman told The New York Times's Quentin Hardy. "We want to build out our software, but I don’t think we are done yet on hardware. There is a lot of opportunity." That opportunity isn't just PCs either. Whitman has also indicated that the company might get back into the tablet thing, too. 

This article is from the archive of our partner The Wire.