Hewlett-Packard to split corporate hardware and PC and printer businesses
06 Oct 2014
American multinational information technology corporation Hewlett-Packard has decided to split into two separate companies - one focused on PCs and Printers and the other on corporate hardware, software and services, The Wall Street Journal reports.
An official announcement of the split is expected on Monday morning in the US, the report said.
The plan, according to the report, is separate its computer and printer businesses from its corporate hardware and services operations, and spin the unit off through a tax-free distribution of shares to stockholders next year.
HP's board, including the current CEO Meg Whitman, had held off an earlier proposal by former CEO Leo Apotheker to split the two operations along with the ill-fated Autonomy acquisition (See: Hewlett-Packard completes $10.3-bn Autonomy acquisition and Autonomy acquisition ousts HP chairman, two directors)
Activist shareholder at Relational Investors, Ralph Whitworth, who became HP's chairman until taking leave in July, also wanted the Silicon Valley technology giant to consider splitting operations as one of the options for moving ahead.
The company provides hardware, software and services to consumers, small- and medium-sized businesses (SMBs) and large enterprises, including customers in the government, health and education sectors.
HP, which has pioneered the reshaping of computer and printer technologies, has failed to adapt to the new era of mobile and online computing. It is now planning to focus on the faster-growing corporate services market, the Wall Street Journal reported.
For a company, which has a market value of $66 billion, more than 300,000 employees and is on track to book $112 billion in revenue in the year to October, the move could be a monumental change.
Investors, however, have lapped up the HP stock, sending it up from about $13 in December 2012 to $35 today.
HP, which saw its printing and personal systems unit sales slip some 7 per cent last year, is taking advantage of the recent revival in its stock-market fortunes to split the business voluntarily rather than being forced into doing so under investor pressure.
In the most recent quarter, HP posted revenue of $27.6 billion, up 1 per cent at the same time last year and though only a slight uptick it marked HP's first year-over-year gain in quarterly revenue since its fiscal third quarter in 2011.
HP's printing and personal computing business accounts for about half its revenue and profit, according to results for the latest financial quarter.
According to WSJ, which cited one it its sources, the plan called for current HP CEO Meg Whitman to become CEO of the new so-called enterprise company and also be chairman of the PC and printer company.
CNN Money reports that the split comes after several spinoffs and breakups this year, with eBay announced plans to spin off the online payment platform PayPal, which it bought in 2002.
The potential move has been welcomed by some investors. Brendan Connaughton, chief investment officer at ClearPath Capital Partners said the split would HP to be more "nimble" and let it "reshape" its business, CNN Money reported. He added the move would put renewed focus on enterprise services, "where they have incredible margins," sometimes upwards of 20 per cent.
Printers and computers made up 51 per cent of the company's quarterly revenue, while the rest came from four businesses that offered various technology services, including consulting, software and financial programmes.
HP had earlier announced plans to cut additional 11,000 to 16,000 jobs by October, adding to the 34,000 employees that it had already let go.
The layoffs since Meg Whitman, the CEO of HP, took charge at the top in 2011, had totaled around 45,000, and HP has projected savings of $4.5 billion per year.
