News on HP and Hard Drive Shortage

Hitachi

Ken McClelland — Vice-President of Sales, Network Management Group, Inc.

 

There are a couple of things that have transpired in the computer industry in the last month that I believe are worthwhile to note. First, a typhoon caused massive flooding to parts of Thailand at the end of August. This flooding has covered about one-third of Thailand’s surface area. What does this have to do with technology you ask? The flooding has had serious impact on the countries manufacturing business, notably the manufacturing of computer hard drives. Thailand accounts for approximately twenty five percent of the world’s hard drive production. Supply chains for hard drive manufacturing in other countries will be disrupted as well. Factories that produce components used in over 70% of worldwide hard drives produced by Western Digital, Seagate, Hitachi, Toshiba and Samsung have been damaged as well. Industry analysts are noting that the reduced manufacturing capacity will cause inventory constraints and increased prices throughout the end of the year and into the first quarter of next year. Please keep this under consideration as you plan your year-end computer purchases as well as your budgeting for 2012 Q1.

On a brighter note, Meg Whitman (Hewlett Packard President and CEO) announced last week that HP will not sell off its Personal Systems Group. The Personal Systems Group (PSG) is the business unit responsible for the manufacture and sales of desktop, workstation and mobile computers. This unit was the number one manufacturer of personal computers in 2010 with worldwide revenues totaling $40.7 billion. This accounts for over one third of Hewlett Packard’s overall revenue, the number ten ranked company on America’s 2010 Fortune 500 list.

This follows former Hewlett Packard CEO Leo Apotheker shocking the technology industry on August 18th when he announced that HP was exploring “strategic alternatives” for its PSG unit. These alternatives may have included a sale or spin-off of the Personal Systems Group. In a written statement Meg Whitman states, “It’s clear after our analysis that keeping the Personal Systems Group within HP is right for customers and partners, right for shareholders, and right for employees. HP is committed to PSG, and together we are stronger.” Hewlett Packard believes the PC business is too ingrained in the company’s supply chain and other key HP operations to let it go. Computers also help promote HP’s brand, and are a crucial part of the company’s “one-stop shop” services that it offers to corporate customers, HP said.

“As part of HP, PSG will continue to give customers and partners the advantages of product innovation and global scale across the industry’s broadest portfolio of PCs, workstations and more,” said Todd Bradley, head of HP’s Personal Systems unit. “We intend to make the leading PC business in the world even better.”

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