I have to admit I was quite surprised by HPs announcement several weeks ago that it was seriously exploring getting out of the PC manufacturing business. Now that this desire/strategy is apparent is it costing them current business?
All I can say is that were I in the market, I would not now consider an HP.
The reason they want to get out of the hardware business is because the margins are so low. So I don’t think they would care if they lost hardware sales now, especially not individual retail sales. The big question is whether it’s hurting their services and enterprise businesses.
Another thing to consider is that they only made this decision a couple of weeks ago. That’s too soon for any enterprise contracts to be won or lost; these things take months. Also, note that HP seems to be following IBM by outsourcing the hardware business (to Lenovo in IBM’s case) and it doesn’t appear to have hurt IBM. (Admittedly, IBM’s revenues are probably smaller now, but the margins are better in the services business, especially when you do much of the work in India.)
I’m surprised it took HP this long to realize that should not have been in the PC business in the first place.
In the first place? It used to be a higher margin business and worthwhile to be in it, but now they’re just commodities. Plus people first moved away from desktop PCs in favor of notebook systems and then in favor of smartphones and tablet PCs. Now buying Compaq was a stupid idea.
Someone in another thread posted an ars technica article that talked about how apple’s margins are bigger because there’s basically three or four models of laptops, while PC manufacturers seem to think the goal is to customize with dozens upon dozens of models of computers. Makes sense to me!
Where would Ars Technica have found solid numbers on Apple’s margin on its Mac and Macbook line of personal computers? That is not part of their Annual Reports and I think generally that is by design, they do not want it known specifically what their margin is on specific lines.
Apple’s overall corporate margin is much higher than Dell’s, but I think it’s very hard to say that it comes from their PCs, it’s possible (even probable) the high margin is from devices like smartphones, MP3 players, and the iPad.
Further, even if Apple’s personal computer division enjoys a higher margin than similar products I can’t imagine it is because they “have fewer models.” What basis is there to make such a claim? Sony doesn’t have that many different models, and in reality there aren’t that many different models of Lenovo Laptop. The MacBooks and Macs are almost as customizable as anything you’d buy from HP or Dell. Those companies do choose to divide their products into more distinct lines, but I don’t know that is a reason for higher margin, nor do I know that Apple’s approach is what most customers want. Apple is not king of the personal computer market, some 85%+ of that market goes to companies like HP and Dell that sell many different models.
Finally, BMW’s margin is a lot higher than GM’s, but BMW has a shit ton of models. If you look at their home page BMW has 10 major “series” of cars. Each series has 4 to 15 specific models of car.
What is actually the case is that BMW is selling a luxury good and those almost always intrinsically have a higher profit margin per unit than vehicles like a Ford Fiesta or Ford Focus which are designed to move lots of units. A luxury product you know out of the gate you have priced yourself out of the mass market, but you hope to make up for it by high per-unit sales and per-unit profits. I think it is more likely if Apple PCs enjoy a higher margin than at competing companies it is because they have successfully branded their PCs as luxury class and people are willing to pay that premium.
In my opinion, HP lost its way when they spun off the Test and Measurement division into Agilent. That was probably the highest-margin part of the whole thing. If they’re getting out of the PC business, what have they got left? Servers?
They still have the printers business and also the services business, based on the EDS acquisition.