August 24, 2011

Will Intel Buy HP PC Business?

Will Intel buy HP PC business?
With HP’s plans to sell its PC business, speculation has started on who will buy the $40B business with very low-margins.

Samsung – maybe. With DRAM, Flash memory and displays, Samsung is a big supplier of parts for the PC. And they are capable of running a $40B business.

Lenovo - maybe. But they already have a PC business that is doing reasonably well. Why spend money to buy a business, when a lot of it will come to them anyway, for free if HP-PC does not get acquired or implodes.

Acer – unlikely. They have their hands full incurring losses in their existing PC business.

Sony – unlikely. Sony, relatively, is a tiny player in the PC business and does not have the capacity to absorb a large business.

Dell – unlikely. They are busy trying to find a higher-margin business than PC’s. HP-PC will just drag them down again.

One company that has not been mentioned – Intel. A few reasons why Intel may buy HP PC business.

HP is one of the biggest sales channels for Intel microprocessors and any disruption there will directly affect Intel’s CPU business. e.g. if HP-PC business implodes because of all the uncertainty. HP has long been a screwdriver builder of PC’s. Intel supplies the designs and microprocessors for the PC’s. HP gets it built by contract manufacturers in China and sells it.

Intel is learning by watching Apple, who has seen tremendous success by controlling the full ecosystem of a market – hardware, software, channel, and apps. With HP-PC, Intel could do the same for PC’s. Although Intel does not have Apple’s design sense, it can still improve the PC experience significantly for end users, spurring growth and margins in the market.

Intel is also learning by watching Google buy Motorola, which enables Google to deliver a fully integrated experience in mobile devices like Apple. And, Google may buy Nvidia as the next step in this process.

For Intel, the key question - what good is all the innovation in chip design and manufacturing if it is not showing up in consumer products? With HP-PC Intel can solve this problem. It can speed up the pace of innovations in PC’s and ensure that the results reach the end users a lot quicker.

Microsoft is the chief fly in the ointment for all of this. Microsoft would still control the OS and key applications for PC’s.