HP considers quitting while it's ahead
HP considers quitting while it's ahead
By Henry Leineweber, Resource Recycling
Hewlett-Packard, the leading producer of PCs in the world, dropped a bombshell on the electronics industry this past week, saying it is discontinuing its fledgling phone and tablet products, and will explore the possibility of selling or spinning off its PC business over the next year. But what does this mean for the electronics recycling industry?
Needless to say, the world's largest desktop PC manufacturer has to comply with the 25 existing state electronics recycling programs, although the effect a potential change in the company's PC business would have on HP's take-back obligations varies from program to program.
"One thing to consider," theorizes Jason Linnell of the National Center for Electronics Recycling, "is that a lot of the producer responsibility laws based on return share have been going away, in favor of a calculation based on market share. So in this case, whichever company bought the PC division, or if it was spun off, their recycling obligation would be based on the volume of new units sold. Most likely, that's how legacy HP products would be dealt with."
The closest analogy to the possibility of HP selling its PC division can be found in IBM, which sold its PC unit to Lenovo in 2004. However, the complex, $1.75 billion joint venture at the center of the deal included negotiated arrangements for Lenovo assuming the IBM brand, which essentially ensures legacy IBM equipment is covered under both return share and market share systems. If HP spins off its PC division under a new brand, or if another OEM purchases the division, then HP could still potentially be responsible for some take-back operations in some states, even if it exits the PC business.
Through its global mail-back program, HP took back over 166,000 tons of its computer hardware and supplies for recycling or reuse  in 2010, including a significant fraction – 24,000 tons – of printer ink and laser-jet cartridges. Just under 43,000 tons of this total came from the Americas. HP is also the highest-ranking computer OEM on the GreenPeace's ranking of green companies.
The company's enterprise computer systems might be managed differently, however. Since enterprise equipment comes back to HP off lease, there's still an obligation there to manage that equipment currently in circulation. Whether that gets negotiated as part of some new deal is unknown and likely won't become apparent until a clearer plan for the division is announced.
In the long term, the decision to explore options  regarding the company's Personal Systems Group is an example of how shifting consumer preferences affect production and, ultimately, the composition of the waste and recycling stream. In the company's quarterly earnings conference call, CEO Leo Apotheker explicitly cited this sea change as reason for the company's reevaluation of one of its core businesses, saying "the tablet effect is real… the TouchPad [HP's recently introduced and now defunct tablet] is not gaining enough traction in the marketplace. Our PC business needs the flexibility to make its own decisions."
With their radically different designs, relatively low price, and smaller size, the consumer shift toward mobile computers and tablets undercuts the selling points of refurbished PCs, but also has an effect on the broader electronics recycling industry as well. For instance, printed circuit boards account for just 6.1 percent of the iPad's 1.6 pound weight, with the rest being mostly display glass and batteries. While in the short term, these products will have little effect on the composition of the recycling stream, the eventual outcome will be significantly lower volumes of pounds recycled, even if the number of devices collected for processing continues to increase.
While the volume of PC shipments is still greater than newer mobile devices, this is likely to not be the case much longer. Overall, demand for PCs from all manufacturers is shrinking, according to  Applied Materials, a leading supplier of semiconductor manufacturing equipment. In its earnings call, the company predicted that in several years, the growth of the tablet and smartphone market will be large enough to offset declines in other areas, but for now, weaker than expected consumer spending is hurting sales and causing computer OEMs to scale back orders for components.
In the second quarter of 2011, global PC shipments increased 2.3 percent , year-over-year, to 83.3 million units with HP remaining the top manufacturer, shipping 14.4 million units. In comparison, mobile and tablet computer shipments increased 28 percent , year-over-year, in the same period to 64.4 million units. Tablets (mostly thanks to Apple's iPad, which has an 80 percent market share in the category) accounted for over 16 million units of the 64 million total, and grew approximately 400 percent, year-over-year. Apple now leads HP as the dominant manufacturer of mobile PCs, and the move by the latter company is a tacit admission that HP will refocus on imaging, IT solutions and enterprise products, rather than compete in an increasingly crowded consumer space.
According to the Wall Street Journal , HP's consumer PC division brought in $9.59 billion in revenue last quarter, but there is a trend in declining revenue for the unit and PCs increasingly face tighter profit margins. By contrast, the company's printer division brought in $6.09 billion in revenue during the same period, and HP's enterprise computer and equipment division had $9.1 billion in revenue.
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