I understood why IBM ditched PCs, because they weren't profitable. I can kinda-sorta see HP dropping consumer PCs, but if someone buys an HP PC, aren't they more likely to buy an HP printer? Aren't stores more willing to bundle printers with computers that came from the same manufacturer? Dell sure thinks so on both counts. That's why they started buying printers from other companies and slapping their name on them.
And in corporate markets, the more you can offer them, the better off you are. Sell them PCs, and you're in better position to sell them printers and services. Lexmark can offer printers but not the other two. IBM can offer service but not PCs and printers. It's worth it to break even on the PCs if it helps you sell the profitable stuff--servers, printers, toner, services, switches and routers.
I always thought it was a mistake to buy Compaq, but now they need to make the most of it. And spinning the business off doesn't seem like the best way to me to make the most of it, especially since their complaint is just that it wasn't profitable enough. They're down to three major competitors (Dell, Acer, and Lenovo--four if you count Apple). All of them but Apple are dealing with the same margins. How is making computers going to get much less profitable?
I think they ditched the tablet too soon too. Yeah, it wasn't as good as the others. So drop the price to $299. People are willing to put up with it not being as good if it's half the price. At $299 it's nowhere near as profitable, but tablet hardware costs about the same as netbook hardware, and there's no overhead for the Windows license on a tablet running Web OS. Buy some market share by settling for lower profits, watch the market segment grow and build up a library of apps, fix the bugs... Why not try it? Now they've just thrown away the $1.8 billion they spent on Palm, with vague plans of trying to license it to others. Who's gonna do that?
