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HP decides to keep PC division

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Hewlett-Packard (HPQ-N) is retaining its personal computer unit following an extensive review that showed that a separation would have cost at least $1.5 billion US in one-time expenses.

The retention of the PC business marks the latest flip-flop in strategy as the company had said earlier that its preferred option was to spin out the business.

The world's largest technology company by revenue stunned investors when it announced in August that it is considering strategic alternatives for its Personal Systems Group (PSG) -- which includes PCs -- and would kill its new tablet computer as part of a major revamping away from the consumer market.

The California company has been struggling in the PC market -- a low-margin but high revenue business -- as niftier gadgets such as Apple Inc.'s iPad have lured consumers away.

Citing deep integration of the PC group in HP's supply chain and procurement, recently appointed Chief Executive Meg Whitman said the company was "stronger" with the unit.

Separating the PC business would have meant about $1.5 billion in one-time expenses including establishing the infrastructure such as new systems for IT, support, sales and channel operations, a company spokesman said.

The elimination of joint opportunities -- such as branding and procurement -- would have cost HP over $1 billion annually, he said.

The decision to review the PC business was part of former Chief Executive Leo Apotheker's sweeping strategy that was not welcomed by investors. Whitman replaced Apotheker last month after the former SAP CEO struggled to halt a 50 percent plunge in HP's share price.

Whitman had promised a decision by the end of the month.

Some of the alternatives that HP was previously considering included hiving off the business into a separate company through a spin-off or sale.

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