About turn! HP to keep its $40 billion computer business after all

So, no more head scratching in Silicon Valley! Hewlett Packard is keeping its its powerful personal-computer division after all, the company's new CEO Meg Whitman , former boss of eBay, has announced.

HP CEO Meg Whitman

It was only in August that HP's then-CEO Léo Apotheker announced his decision to separate and perhaps sell the company's PC business as it tried to move into other sectors.

One month later, as the company's shares tanked, Apotheker was fired, reportedly because of his sloppy handling of the entire situation. The world's largest PC maker - annual revenues of $40 billion - then turned to board member Meg, who had tried and failed to become Governor of California .

Taking the HP job last month, she said the decision to split the company in two would be "re-evaluated". On Thursday,it was revealed she had made her mind up . She recognised that HP had "confused the market pretty dramatically" when it announced the earlier decision.

In a conference call, she told analysts that the decision to keep the division within the company made sense. She revealed there had been intensive five-week analysis by 18 separate teams of employees.

"At the end of the day, the costs and the risks of a separation were simply greater than any valuation we could create," she said. She said she "felt great" about the decision.

Chief Financial Officer Cathie Lesjak revealed that it would have cost $1.5 billion to spin off the division and launch it as a separate entity with global operations.

Lesjak told The Wall Street Journal in an interview that "it slowly but surely became very clear that the math just wasn't going to work on this one."

Tim Bajarin, an analyst with Creative Strategies, told the San Jose Mercury News that the announcement was no surprise.

"What was a surprise was what Léo said in August. Frankly, that left a lot of us scratching our heads.''

For HP to even contemplate jettisoning its PC business, said Bajarin, "was a shocker. All that's happened today is that sane heads and sane minds have concluded that Léo's was an incorrect decision and now they're just correcting it."

HP is still the world's largest PC company, with revenues of $40.7 billion for the fiscal year 2010, is still selling huge numbers of computers to businesses and they still have to service them.

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