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Report suggests Hewlett-Packard is "planning to split into two"

by Mark Tyson on 6 October 2014, 11:35

Tags: Hewlett Packard (NYSE:HPQ)

Quick Link: HEXUS.net/qacjwb

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A recent report in The Wall Street Journal says that US technology giant Hewlett-Packard is "planning to split into two companies". It will separate it's PC and printer business from its corporate hardware and services operations.

The report states that HP has intentions to announce the move today, according to sources familiar with the plan, whilst the split is expected to be made through a tax-free distribution of shares to stockholders next year.

The current HP CEO Meg Whitman will lead the enterprise-focused half of HP, whilst the PC and printer company will name Dion Weistler as its CEO whilst appointing Whitman as chairman. The company's PC business accounted for around half of its revenue and profit in the last quarter. However, it still reported a sharp fall in profit in August despite a rise in revenue thanks to improved PC sales.

The split hopes to put more focus on the faster-growing corporate services and enterprise computing market, but it is unclear at this point how the company plans to place its 300,000 staff in each of the planned businesses. If the spin off goes ahead as planned, the report states that it would give rise to two publicly traded companies, each with annual revenue of over $50 billion.

HP is one of the latest in a line of companies to break up operations in an effort to become more agile and to capitalise on faster-growing business sectors. The split is part due to belief that operations with different growth profiles will be better managed as separate entities, and is likely also due to shareholder pressure. eBay announced just last week that it is splitting with electronic payment service PayPal, which it acquired over 10 years ago.

"This would be a brilliant move at just the right moment in the turnaround. It would liberate significant trapped value," Ralph Whitworth, an HP investor who until recently was its chairman, said. WSJ's report noted that HP and its investors have long considered such a planned breakup.

HP has already laid-off tens of thousands of employees and cut other costs in order to provide a lift to its shares in response to lower sales. The company has struggled to adapt to the shift towards mobile computing and has seen shares remain well below their highs of recent years. It also lost its title as the largest PC maker by shipments last year, slipping to number two position as it was overtaken by China's Lenovo.



HEXUS Forums :: 10 Comments

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Shame HP laid of tens of thousands of people just the keep the share price higher…..

With that kind of ethics they don't deserve to do well.
They have another 55k employees slated for the chopping block… glad I don't use their products, so one less item to worry about boycotting.
Brewster0101
Shame HP laid of tens of thousands of people just the keep the share price higher…..
With that kind of ethics they don't deserve to do well.
If it was a share price booster then it didn't work very well, and the official reason was that there was a lot of “surplus” available. The continual job losses are ‘wonderful’ for morale though.
GuidoLS
They have another 55k employees slated for the chopping block… glad I don't use their products, so one less item to worry about boycotting.
I don't understand what you're getting at here.

If you check out the Forbes coverage you'll see that they're saying that HP is merely following that other behemoth - IBM - in the diversify and divest strategy. Forbes also said that there were major job losses expect, yet followed that up by pointing that “back room” setups will have to be duplicated in the two separate companies. So are they saying that HP A/B will be firing engineers and technicians only to replace them with administrators? If so, then that sounds like a real smart move! (sarcasm)

The HP public statement though was that the streamlining of the business was done expressly to setup for this split.
Brewster0101
Shame HP laid of tens of thousands of people just the keep the share price higher…..

With that kind of ethics they don't deserve to do well.
Well said.

Last years it was proven that they corrupted few governments just to sell their stuff.

This company seems to have no ethics from the roots.
DevDrake
Well said.
Last years it was proven that they corrupted few governments just to sell their stuff.
This company seems to have no ethics from the roots.
That last bit is just a pile of total manure, and I actually find what you're saying personally offensive*. :redcard:

I remember those charges you're referring to, and even the prosecutors concerned said that it was the actions of a few individuals who were more concerned about their sales-related bonuses than adhering to the ethical standards. HP as a company got slapped with fines because of the “corporate responsibility” aspect, that the managers of those … “people” … should have been more aware of what they were up to. Which I can kind of see the point of, and agree.

I could be wrong, but I also seem to remember that the offenses also happened during the tenure of Mark Hurd. In which case I can see where the pressure for “sell at any cost” was coming from (I could talk about MH, but I'd get banned for bad language). That said, I would have had no issue with the offending folks getting serious jail time - preferably not in a US “country club” style open prison. Federal crime needs Federal time!

Leo Apotheker might have been a loon in other respects, but he definitely “upped the game” with regards to enforcement of ethical standards. Current management have continued that trend, putting ethical business practice front and centre. I could give examples, but I really don't want to bore you.

(* HP pays my bills, but anything I'm posting on Hexus is purely my personal opinion)