HP has decided to keep its PC business after all – now it has to figure out what the future looks like for the business, says silicon.com editor Steve Ranger.

Well, that was a rollercoaster few months for HP. The company has quickly wrapped up its evaluation of “strategic alternatives” for its Personal Systems Group (PSG) – that is, worked out whether it is best to spin off, sell or keep it – and decided the unit will remain part of the company.

“HP objectively evaluated the strategic, financial and operational impact of spinning off PSG. It’s clear after our analysis that keeping PSG within HP is right for customers and partners, right for shareholders, and right for employees,” said Meg Whitman, HP’s newly installed president and CEO. “HP is committed to PSG, and together we are stronger.”

HP’s review told its execs what pretty much everyone else in the industry knew already: that the PC business was deeply integrated with the rest of the company’s supply chain, IT and procurement, and contributed a huge chunk of credibility to the rest of the portfolio. On top of that, the cost of recreating all of this infrastructure if PSG was spun off in a stand-alone company “outweighed any benefits of separation”.

All of this brings to a close a moderately bizarre chapter of HP’s history, which saw it not just consider spinning off its PC business, but also buy Autonomy, shutter its webOS business and send the TouchPad to an early grave along the way.

HP TouchPad

HP’s TouchPad was a casualty of the company’s indecision around the future of its PC businessPhoto: Steve Ranger/silicon.com

The general HP’s decision to hold onto PSG has met with a positive response, along with quite a lot of headshaking from industry watchers who are bemused by the whole saga, and HP will certainly have to spend some time rebuilding its credibility.

Ovum chief analyst Carter Lusher applauded the speed with which Whitman decided HP’s intentions for the PSG, pointing out: “The announcement by now former-CEO Leo Apotheker that PSG was undergoing a strategic review and could be sold or spun off was an unmitigated disaster.”

Lusher added: “Everything around the PSG strategic review decision sent shock waves of uncertainty through the enterprise and public sector IT executive circles as it called into doubt HP’s ability to execute a clear strategy for any product or solution.

“IT executives need insights into strategic vendors’ intentions in order to make multi-year commitments, and HP’s actions called into doubt its stability.”

But Lusher said Whitman’s swift decision-making shows that…

…Whitman “might be able to stabilise HP and return it to its previous status as a strategic supplier to IT.”

Analyst group TBR described it as “the smallest surprise” that HP would keep hold of PSG.

It pointed out that having a PC business helps HP find customers for its higher margin offerings, from printers to servers to services. The PC business helps create economies of scale for the manufacture of other hardware which provides entry points for the rest of HP’s sales force.

TBR said its research had shown that unsettled customers had already started looking at other vendors, vitally not only for PCs, but also for servers and services, something that would have quickly raised the alarm with HP’s board.

One thing that CIOs prize – especially for dull but essential items like PCs and servers – is predictability and reliability. HP’s upheaval worried them, and worried partners, both of whom looked to HP for one-stop shopping. And while TBR said HP is capable of rebuilding that trust, it will take time.

Perhaps selling or spinning off the PC business might have worked if it had been handled differently – if HP had lined up a buyer, or worked out all the details of the spin-off, before making the announcement.

As the rise of smartphones, tablets and the cloud has demonstrated, we are moving into either a ‘post-PC‘ or a ‘PC-plus’ era, so being the biggest PC maker around isn’t quite what it used to be. After all, getting out of the PC business worked well for IBM. But even with PSG’s future decided, HP still has to articulate what kind of company it wants to be, and how its different businesses will contribute to that. Was the idea of becoming a high-margin software company just a short-lived mid-life crisis for HP, which will now return to a quieter life?

The challenge for PSG and HP will be to make PCs not just relevant but essential again. As Ovum’s Lacher points out, that might mean embedding its management software to make PCs easier to manage. Another option is to come up with bundles of products and support to help CIOs implement BYO device programmes. It has to do this while rebuilding customer confidence and fighting off rivals emboldened by HP’s indecision, and figuring out what to do about tablets. Windows 8 tablets are likely to be a part of that future but who knows – perhaps the TouchPad could rise, yet again?

That’s the job ahead. What’s for sure is that the way the initial PSG announcement was made, to be followed by an extended bout of navel-gazing – was always going to be devastating to customer conference and thus the prospects of the PC business until it was resolved.

Whitman has done the right thing in ending the uncertainty, but as a result, even if HP wanted to rid itself of the PC business, it can’t now.