Hewlett-Packard risks putting its PC business in an awkward "lame duck status" as it looks to spin it out.
Sterne Agee analyst Shaw Wu believes that such a move could take 12 to 18 months given the legal, tax, and business issues that need to be sorted out, in line with the company's own expectations. HP is opting to go the spin-off route because of the lack of buyers and the tax-free nature of such a transaction.
But the downside to a spin-off is the length of time necessary to prepare for such a move. HP has expressed its desire to quickly shed the PC business, but the process will take time. In the interim, HP could be put in a holding pattern that could severely cut into any momentum left in the PC business.
"The biggest risk we see here is that the PC business could in 'lame duck status' and its business could come under pressure with uncertainty and competitors taking advantage of it," Wu said in a research note issued today.
Motorola, for example, barely treaded water for two years before it completed its own split into Motorola Mobility and Motorola Solutions at the beginning of this year. The spin-off was delayed initially because of the weak market conditions, a risk HP also faces.
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It'll be interesting to see how shareholders react, Wu said, noting that some of the investors he has talked to said they preferred not to own stock in the PC business.
Indeed, an overwhelming majority of HP investors remain opposed to HP's planned acquisition of Autonomy, which would get it further into the business software business, according to Bernstein analyst Toni Sacconaghi.
"Investor exasperation with the company is the highest we have seen in 13 years following the sector," he said in a note published on Tuesday.
HP Chief Executive Leo Apotheker, however, told the Wall Street Journal that he was "hearing a lot of appreciation" from shareholders.
An HP representative wasn't immediately available to comment on the analysts' comments.
HP last month said it would shed its PC business as it looks to focus solely on the more profitable business software and consulting operations. The move effectively marked the beginning of HP's exit from any consumer-centric business, which included halting its WebOS mobile arm.
The Silicon Valley mainstay has made the best of the situation. Yesterday it unveiled a new line of monitors, and it has vowed to make a second batch of its TouchPad tablet after the original stock flew off the shelves after a massive price cut.
Competitors such as Dell, Acer, and Lenovo are likely licking their chops waiting to take advantage of the situation.
Updated at 7:36 a.m. PT: to include an additional analyst comment.