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Face-Off: Does HP's PC Business Affect Us Enthusiasts?

Potential Suitors, Continued: LG Or Private Equity?

Alan: Yeah, a lot HP monitors use LG panels, so just switching to Samsung would be a great move. Samsung could be going for the Best Buy, Walmart, Costco PC buyer, which isn't a bad market to have.

Actually the best move for Samsung is to only partner with whoever buys HP. The organization buying HP needs to be more cost efficient. If Samsung meets with said organization and offers superior pricing for a pure Samsung-supplied DRAM, hard drive, SSD, and LCD, Samsung would win without actually taking on extra risk.

Whenever there's Samsung, there's LG. LG also makes excellent notebooks, but unlike Samsung, LG doesn't sell its notebooks in the US. An acquisition of HP PC business would provide LG with many of the same benefits that Lenovo's acquisition of IBM had. LG would gain the business expertise required for managing a multinational PC corporation that it currently lacks. It would gain access to a wider market than it currently owns and leapfrog its PC business.

Like Samsung, LG has been aggressive with smart appliances, and that’s where webOS would be valuable. Its TVs already feature an App store! Since LG uses Plex to power its media streaming, it could use a consumer line of PC products preinstalled with the Plex Server to showcase home entertainment products. Like Lenovo, LG would have to purchase HP's business and keep it largely intact. From a financial standpoint, this works in the short term. Long term, LG won't have the ability to do anything that HP couldn't. It could get a few years of profitable business—remember HP personal computing division actually makes a profit. It's the long-term goal of sustaining that profit that will be tough. In this last financial quarter, LG Home Entertainment actually turned a profit when everyone else was losing money. Samsung is probably the more likely candidate, but it all depends on the vision of the CEO and what HP is willing to sell its PC business for.

Chris: I think that LG's lack of a business computing play similarly hurts its chances of succeeding by running the business like HP. It'd need a different approach entirely. If anything, I wonder (and doubt) that the addition of PC business and webOS would add enough to LG's already-divergent direction to warrant considering this a viable move, though.

Alan: Yeah, I'm just throwing it out there. Last, you have a private equity consortium. Private equity firms love to buy distressed companies, turn them around, and then sell them for a profit. To do this though, HP has to be sold at a fire sale price.

HP's plan to exit the PC market while it’s in the #1 position means that it has no confidence in the long-term success of the PC. This is the only time I can recall in history that a company in the #1 position has decided to bail out. There are three scenarios that can play out.

One, HP is acquired by a firm that is able to succeed where HP could not. Samsung is one such company that could potentially have lower manufacturing costs and more economies of scale. If this happens, mainstream consumers will win with cheaper hardware.  Unfortunately, this will also shift the balance of power between building and buying a computer. If HP-Samsung actually happens, and Samsung is able to decrease the cost of manufacturing even further, then enthusiasts lose. The cost of components from Newegg and a Windows 7 software license would be more than buying a pre-fab machine from Best Buy. Enthusiasts would be more likely to buy and upgrade such a machine than build their own. That means add-in board manufacturers and CPU cooler manufacturers, and all the small companies making unique products for the PC would die out.

Chris: This is far from a certainty, though, for two reasons. First, the factors that compel enthusiasts to build today won't change. You'll still end up with tier-one boxes loaded with garbage software, leaning on cost-reduced boards that lack much of the functionality an enthusiast is ultimately looking for. Second, Samsung's manufacturing extends to memory, storage, and display technology? With the possible exception of SSDs (and this being less true over time), I don't see where you'd get a lot of added value from a Samsung-built PC. I certainly wouldn't anticipate savings significant enough to alter the enthusiast's mind-share and compel do-it-yourselfers to start gutting Samsung machines.

Chris Angelini
Chris Angelini is an Editor Emeritus at Tom's Hardware US. He edits hardware reviews and covers high-profile CPU and GPU launches.
  • mayankleoboy1
    who is alan dang?
    Reply
  • AlanDang
    Who is Alan Dang? He is supposed to be Turkish. Some say his father was German. Nobody believed he was real. Nobody ever saw him or knew anybody that ever worked directly for him, but to hear Kobayashi tell it, anybody could have worked for Soze. You never knew. That was his power.
    Reply
  • tacoslave
    AlanDangWho is Alan Dang? He is supposed to be Turkish. Some say his father was German. Nobody believed he was real. Nobody ever saw him or knew anybody that ever worked directly for him, but to hear Kobayashi tell it, anybody could have worked for Soze. You never knew. That was his power.calm down kevin spacey
    Reply
  • cmcghee358
    Good analysis. The last bit really made me like HP, even though their consumer PCs are cheap enough to justify custom builds to my customers.
    Reply
  • nevertell
    Does HP's PC Business Affect Us Enthusiasts?

    No, it doesn't.
    Reply
  • demonhorde665
    nevertellNo, it doesn't. cheers TO THAT , dumbesta rticle ehader i've seen on tom's todate

    NO real enthusiast buys name brand , they build thier own period. pfft , alien ware, lenovo HP just pffft only a wanna be enthusiast would bther with any of these
    Reply
  • nerrawg
    Good article on a topic that I think a lot of enthusiasts have been dreading. I find it interesting that you guys often metaphorically relate hardware development back to the automotive industry. If PC hardware is the cars, then software is the road network that people driving have to put up with. At the moment I believe that in both cases it is the roadnetwork/software that is the limiting factor. This decade has given us the most thrilling performance cars with incredible bang-for-buck such as the GTR, Corvette, Camaro, M3, Focus RS etc etc. However most of these cars are so fast that most people could never really use them to their potential on a day to day basis. The same can be said about modern PC hardware - its overpowered for the average user. Only the relative handful of consumers who take their GTR to the track on weekends/spend their weekend playing FPS games, can actually take advantage of these products. This in turn is severely limiting the market potential of what on the surface looks like such an amazing product base. People know that even though 0-60 in 3.5 and top 180 is incredible, it makes no difference when your stuck starring at fenders and red lights all day.

    Really, the development in hardware tech is amazing, but what we need to keep it moving is a new class of ubiquitous productivity software that demands better hardware. My suggestion for this is to create more advanced interfaces between the user and the PC - we need to replace the mouse and keyboard with motion detection devices and speech recog that actually works. Once the software can do this I believe we will see a drastic increase in performance demand for office software.
    Reply
  • ZakTheEvil
    If you buy HP computers you're not an enthusiast. PC enthusiasts don't give rat's ass about HP.
    Reply
  • christop
    Enthusiasts and H.P don't go together..
    Reply
  • legacy7955
    This so called article sounds like "marketing" to me
    Clearly an agenda going on here, excessive greed by Leo Apotheker and his clown posse.

    Notice that "they" keep trying to "INFER" that the PSG division is NOT profitable without saying so, but then have to admit that it IS profitable.
    Reply