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What Does HP's Decision To Keep PC Business Mean For Dell?

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Photo by Gerard Stolk vers la Toussaint http://www.flickr.com/photos/gerardstolk/

Dell’s hopes of regaining the throne of the world’s largest maker of personal computers have been dashed, at least temporarily. Hewlett-Packard says it will no longer spin off its $40 billion PC division.

"The decision was actually very straightforward," HP CEO Meg Whitman said, according to the Wall Street Journal.  The newspaper says HP realized separating its PC division would have cost about $1.5 billion, much more than initial estimates of $300 million to $400 million.

The news sent HP shares higher today, but the stock is still down about 34 percent over the past year. Dell shares were trading slightly lower this afternoon.

Round Rock-based Dell, which employs about 16,000 people in Central Texas, had been hoping to capitalize on HP’s indecision about whether to remain the world’s largest maker of personal computers.

"Any uncertainty or confusion that exists is an opportunity," Dell CEO Michael Dell said earlier this month in San Fransisco, according to ComputerWorld.com. “No question we've seen significant opportunities from what is going on over there (at HP). Customers think about what is going to happen in a year or two and that erodes their confidence."

Informed observers were also optimistic about the prospects for Dell.

“If HP sells, this is the best thing that could happen to Dell in the next year, year-and-a-half,” John Doggett, a senior lecturer at the University of Texas McCombs School of Business  told KUT at the time.

But HP still faces significant challenges. Marketwatch.com says those include a shortage of hard drives caused by flooding in Thailand, and uncertainty over what HP will do with webOS, the mobile operating system it purchased from Palm last year for $1.2 billion.

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