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HP exec says PC unit spinoff "best value"

The poster showing all three new HP Palm devices is displayed following a media presentation at the Herbst Pavilion at the Fort Mason Center
The poster showing all three new HP Palm devices is displayed following a media presentation at the Herbst Pavilion at the Fort Mason Center

By Terril Yue Jones

BEIJING (Reuters) - A spin-off of Hewlett-Packard Co's PC unit would be the best value for shareholders, according to the head of its PC division, who added that tablet computing was "relevant" to the future market for any spinoff.

HP stunned markets two weeks ago, when it announced it may shed its PC business -- the world's largest after the $25 billion acquisition of Compaq in 2002 -- as part of a wrenching series of moves away from the consumer market. Those included killing off the TouchPad tablet computer in the face of stiff competition from Apple Inc..

Now, the board of the largest U.S. technology company by revenue is expected to decide before the end of the year whether to hive off its PC arm -- which began selling the TouchPad in July -- into a separate company, considered the best option for shareholders.

Personal Systems Group head Todd Bradley told Reuters in an interview he intends to lead any standalone company created, and expects it to be a full-fledged computer maker.

Asked if there could be a tablet in the future of the separated company, Bradley responded:

"Sure, of course. Tablet computing is a segment of the market that's relevant, absolutely."

He said a spinoff of the Personal Systems Group will bring the "best value" to HP shareholders for taxation and other reasons.

"My intention would be to lead it through this transaction ... and if it's a standalone public company, to lead that."

Selling the PC division to a rival such as Taiwan's Acer Inc, which acquired computer maker Gateway in 2007, or to China's Lenovo Group Ltd, which bought IBM's PC division in 2004, is not a desirable alternative, Bradley said.

"I would just say that the numbers don't support that that strategy works," he said, citing Acer reporting its first-ever quarterly loss last week.

HP has struggled in the PC market -- a high-revenue but low-margin business -- as popular devices such as Apple's iPad lure consumers away.

Bradley is on a trip to China, Taiwan and South Korea to meet with employees, suppliers, government officials and media to convince them that HP's PC business will remain robust and committed to Asian markets.

"China's obviously a critically important market for HP as well as PSG," he said.

SUPPLIERS, DON'T FRET

Bradley said HP will increase investments in Shanghai, and over the next three years expand its Shanghai manufacturing base, consolidate six employee sites into one campus, and make Shanghai a regional headquarters in China for the PSG.

"Regardless of what happens, we're the largest PC company in the world. We need everybody energized, and while this isn't business as usual, we need people to go out and sell products every day," Bradley said.

Suppliers to HP PCs will remain largely intact, although the company may renegotiate and redefine the relationships.

"Unwinding the integration that's taken place within HP will be enormous amounts of work and effort, justified by the return we think we'll be able to provide to our shareholders."

Nevertheless, he said, "we will be one of, if not the largest, customers of all of our major suppliers, be it Samsung to LG to Microsoft to Intel."

The Palo Alto, California-based company is now exploring options for its WebOS software, which it acquired through the acquisition of Palm, of which Bradley is a former chief executive.

Bradley has said that a number of companies had expressed interest in possibly using WebOS as an operating system, but he gave no further details on Tuesday, saying that he is not in China to announce or even negotiate anything regarding WebOS.

(This August 30 story was corrected to make clear in the headline and text that the HP executive did not say the TouchPad tablet would be resurrected but said a tablet could be an option for a spin-off company)

(Editing by Anshuman Daga, Matt Driskill, Edwin Chan and Matthew Lewis)

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