Coverage: Hewlett-Packard to split

Hewlett-Packard Co. has decided to become two separately traded public companies — one will be its computer and printer businesses with the others will have corporate services and hardware.

Joann S. Lublin, Dana Mattioli and Dana Cimilluca had these details in their scoop for The Wall Street Journal.

Hewlett-Packard Co. plans to separate its personal-computer and printer businesses from its corporate hardware and services operations, the latest attempt by the technology company to improve its fortunes by breaking itself in two.

The company intends to announce the move on Monday, people familiar with the plan said. It is expected to make the split through a tax-free distribution of shares to stockholders next year, said one of the people.

If the division goes off as planned, it would give rise to two publicly traded companies, each with more than $50 billion in annual revenue.

A number of big companies, including eBay Inc. in tech, have chosen to break up lately, in part because of a belief that operations with different growth profiles are best managed as separate entities. H-P, which has suffered sharp sales declines, sees better long-term potential for its corporate hardware and services business than for its printer and PC unit, said one person familiar with the plan.

Jack Clark wrote for Bloomberg Businessweek that CEO Meg Whitman was reversing a decision she made three years earlier:

After struggling to turn around the company since becoming CEO in 2011, Whitman is adopting a plan to split Hewlett-Packard’s PC and printer divisions off from its enterprise hardware and service groups, according to a person with knowledge of the matter. It’s a scenario she rejected as recently as last year, saying more time was needed to restore the company’s stature as the innovator that put Silicon Valley on the map.

“If you try to hive a division off, it’s really hard because you almost have to recreate the whole thing,” Whitman told Bloomberg News in 2011. Last year, Whitman defended her strategy for the company, saying it “will be one of the great comeback stories in American business.”

Even though she has rejected a split-up of Hewlett-Packard before, Whitman, 58, is no stranger to reinventions. Before running Hewlett-Packard, she pursued a career in politics and made an unsuccessful run at becoming California’s governor. Before that, she ran online marketplace EBay Inc. for a decade, following stints at Hasbro Inc., floral service FTD Cos., Stride Rite Corp. and Walt Disney Co.

“She may have to shift gears now, from having been a very prudent, careful CEO, to being a CEO who’s getting the ball moving,” said Erik Gordon, a University of Michigan business professor.

Quentin Hardy and David Gelles wrote for The New York Times that HP is an indicator of the state of the technology industry:

HP is considered the foundational Silicon Valley company, originating in a garage and then serving as a training ground for several generations of technology leaders. Its changing fortunes are a mark of how much the technology industry, which has reordered many areas of the business world, is now doing the same to itself.

In a little over a year, stalwarts like Microsoft, IBM and Dell have changed chief executives, sold big parts of their businesses or gone private. All of them, along with a host of other companies that became behemoths during a 20-year boom in personal computing and the Internet, are rushing to cope with the rise in mobile devices connected to cloud systems.

Cloud computing uses software to turn numerous computer servers, sometimes a million or more, into single entities. These flexible systems can distribute work with greater efficiency, cutting the overall need for servers, and interact easily with other computers, whether in clouds, PCs, or mobile devices.

Winners in the new landscape include Apple, the king of consumer electronics, with annual revenue of $170 billion. The company makes iPhones, iPads, and hosts through its online stores a wealth of cloud-based software applications. South Korea’s Samsung, the other big winner in smartphones, has dominated the competition, forcing onetime leader Nokia into a sale of its phone business to Microsoft.

Forbes contributor Dave Altavilla said the split could bring some needed focus to the two companies:

The move could allow the two divisions to focus on their core product offerings and go-to-market strategies that are decidedly different between consumer products and the enterprise. The move could signal renewed focus and commitment by HP with respect PCs and Printers, while allowing the Enterprise group more flexibility to react for its own needs as well.

Then again, as analyst Patrick Moorhead, from the firm Moor Insights and Strategy notes,  “The two smaller companies will have less negotiating power than the combined HP does now.” Logically, two smaller HP businesses would conceivably have less demand clout with chip suppliers like Intel, or WD and Seagate for storage products. Should the break-up come to pass, it would make sense that HP somehow manages to maintain combined demand pipelines with key common component suppliers, affording the company the agility it needs as separate operations while maintaining critical mass buying power.

Employees are likely looking for many more details, particularly in terms of jobs and if the company is planning to hire as some functions will now have to be duplicated. HP has a lot of details to sort out, and it will be interesting to see who will run which company and the management structure.