SAN FRANCISCO (MarketWatch) — As Hewlett-Packard Co. chief executive Leo Apotheker heads out on a road show to meet with furious investors, he has a lot to defend on how and why he and the board have decided to look at dismantling some of its greatest assets.

Investors are stewing as they have watched H-P’s HPQ, +0.37% stock lose more than 40% of its value — amounting to about $36 billion in market cap — since Apotheker formally took his position on Nov 1 of last year. While that decline was no doubt helped along by the recent market-wide sell-off, it’s worth noting that the S&P 500 index is down only 5% for that same period.

There are many lingering questions about H-P’s surprise decisions last Thursday, and whether they are the right moves. H-P said it is looking at options for its PC business, which is another way of announcing that it wants out of the business. The company is also killing the TouchPad tablet and its smartphone lines that it got through its acquisition of Palm last year. See story on H-P's potentially painful exit from PCs.

Clearly, H-P has set its sights on the software business, where both its chairman, former Oracle ORCL, +0.38% president Ray Lane, and CEO Apotheker made their money, along with influential board member Marc Andreessen, who spelled out his belief that “software companies are poised to take over large swaths of the economy” in an Op-Ed piece for the Wall Street Journal over the weekend. Read Andreessen's piece here.

Still, the company’s apparent hopes to spin off or sell its $40 billion PC business carries risk. Toni Sacconaghi of Bernstein Research pointed out in a note last week that if H-P decides to spin off the business to shareholders, as it did with Agilent Technologies Inc. A, +0.71% , it will lose, among other things, its hefty purchasing power used to buy commodity parts for servers, computers and printers.

TouchPads move on price slash

“We believe that there would likely negative synergies (duplicate hiring, particularly for the required new corporate center, diminished supply chain purchasing power, potentially weaker strength in distribution) from such a spin-off that would actually lower earnings of the combined companies by about 5%,” Sacconaghi wrote.

Apotheker told the Financial Times in an interview that H-P would regain the $40 billion lost from the PC business “with a better margin profile and a better growth profile.” See Financial Times story here.

But losing purchasing power could mean troubled for other business lines it wants to keep, such as industry-standard servers and blades, whose parts are similar to PCs. Higher profit margins in these servers have been helping companies like Dell Inc. DELL, -1.03% and chip maker Intel Corp. INTC, +1.15% offset the sagging demand in consumer PCs. H-P’s margins have been helped by its buying power and its leading position.

Sacconaghi wrote that if H-P were to really mimic its rival IBM Corp. IBM, +0.60% the company would accept its lower growth rate as a giant technology company, and return its cash to shareholders via stock buybacks.

“We believe that H-P’s financial model ought to be similar to IBM’s: low revenue growth; modest margin improvement through cost cuts and a mix shift to higher value-added businesses; and a disciplined capital allocation process that returns cash to shareholders, primarily through share repurchases,” he wrote.

Apotheker told analysts in a conference call Thursday in explaining the company’s highly rich, $10.2 billion buyout of Autonomy that this deal will be “seamless” and touted his expertise as a software executive. “As an executive who has spent most of my career primarily in software, it is a world I know well,” Apotheker said. “Some acquisitions require heavy lifting, but bringing Autonomy into the H-P world will be seamless and highly complementary.”

But H-P has never been strong in software, and its efforts at growing that business — which first begun under former CEO Carly Fiorina — have come mostly through acquisitions and resulted in a patchwork of little-known offerings for corporations. H-P’s software business grew to $3.58 billion in fiscal 2010, or less than 3% of total revenue for the period, though it also boasted operating margins of more than 20% compared to only 5% for the PC business.

Apotheker is certainly not the first CEO to chase fatter margins, though it’s worth asking if the company will survive the pursuit.

“It takes years to build a great company,” said Stephen Diamond, an associate professor of law at Santa Clara University, voicing some of the fears about H-P’s future on both Wall Street and in Silicon Valley. “It takes months to destroy it.”