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HP Plans To Split In Two

HP Plans To Split In Two

Hewlett-Packard (HP) is a tech giant that has struggled in the past decade to live up to shareholders’ hopes. The Wall Street Journal has claimed that it has become apparent that the company is preparing to split in two.

Citing “people familiar with the matter,” the Journal said that HP will separate its printing and personal computing businesses from its corporate hardware and services operations. The Journal said that a formal announcement could come as soon as Monday, Oct. 6. An HP spokeswoman declined immediate comment.

HP is a major corporation with more than $100 billion a year in revenue. It also has a major workforce that topped 300 000 individuals in recent years. Earnings have rebounded somewhat from depressed levels a few years ago. The revenue growth has been largely hampered. Due to these factors, the company’s entire market value is currently at $65 billion. That leaves HP far behind from newer sector leaders such as Google, Oracle and Facebook. All of these are more highly valued by investors because of faster growth and higher profitability. Even though their annual revenue is significantly smaller than HP’s.

In a FORBES interview in April 2013, HP’s chief executive and chair, Meg Whitman, defended the vast sweep of HP’s current business lines. She did manage to leave herself some breathing room to reconsider. She stated the following: “We are the only competitor that can take you from the device to the data center,” and she called it “a huge advantage.” She also managed to back up her claim by her remarks by saying: “I actually think that’s an advantage that we have to prove out over the next couple years.”

This isn’t the first time that Hewlett-Packard has tried to streamline itself by splitting off businesses. In 1999, the company’s test and measurement businesses were cleaved off and renamed Agilent. In that case, the entities that split away only accounted for less than a third of HP’s financial performance, market value and headcount. Now with the recent split that is being planned, the rate of these factors are most likely close to 50/50.

In the quarter that ended on July 31, both of the both sides of the company accounted for a little less than $1.4 billion in operating profit each. The two halves also featured a nearly identical quarterly revenue of about $14 billion.

The Hewlett-Packard name dates back as far as 1939, The founders William Hewlett and David Packard started the company in a Palo Alto garage. The name will live on to some extent in both halves of the split business. According to the Journal, the printing/personal-computer side will be known as HP Inc. The enterprise hardware and software segments will be renamed Hewlett-Packard Enterprises.

The Journal indicated that Whitman will stay involved with both companies. Her largest commitment will be as CEO of the enterprise side. She will also be a non-executive chair of the printing/personal computing company. HP lead director Patricia Russo is said to become the chair of the enterprise business and HP executive, Dion Weisler is due to become CEO of the printing/personal computing business.