Sunday, October 5, 2014

Si Valley Biz Journal about WSJ story

Report: Hewlett-Packard plans to 

break into 2 companies 

Oct 5, 2014, 10:54am PDT 
UPDATED: Oct 5, 2014, 6:27pm PDT   (my comments in red)

     The WSJ report cited unnamed sources who said the plan
could be announced as early as Monday. The split would be
tax-free distribution of stock to shareholders next year, one
of the Journal's sources said.
It would be the second big breakup of a Silicon Valley tech
powerhouse in a week, following eBay's plan to spin off 
PayPal. It also follows Oracle's announcement thatLarry 
Ellison was handing the CEO reins over to former HP CEO
Mark Hurd and Safra Catz.
Reports of HP's plans come a few weeks after HP's talks
reportedly broke down about a possible merger with EMC,
whose CEO Joe Tucci is near retirement and whose
leadership in the data-storage industry is being challenged
by a group of upstarts.
The move by HP has long been speculated upon and follows
the 2011 exploration of a spinoff of the PC business during
Leo Apotheker's stormy and short tenure as CEO.
Current HP CEO Meg Whitman reorganized the company to
combine the PC and printer units, which are among the
leaders in shrinking businesses. HP was No. 1 in PCs until
last year when it slipped behind China's Lenovo Group Ltd.
The Journal said that Whitman will be chairman of the PC
and printer business and CEO of the other, enterprise-
focused business. Lead independent director Patricia Russo
will be chairman of the enterprise company. Dion Weisler, 
an executive in the PC and printer operation will be CEO
of that business, the Journal said.
HP brought in $55.9 billion in revenue from its printing and
personal systems group last year, about half of its total. But
sales dropped by about 7.1 percent in the unit, compared 
to a 6.7 percent drop for the company as a whole.
Last year, HP lost its place as the largest PC maker by
shipments, slipping to No. 2 behind China’s Lenovo Group
Ltd, according to industry research firm IDC.
The company is Silicon Valley’s 17th-biggest tech employer, 
with 2,600 full-time employees in the region as of May, 
according to Business Journal research. That’s almost a 
50 percent drop from the prior year, when HP employed 
5,000 in the region. The drop mirrors the company’s 
downsizing worldwide, with the company headcount at 
317,500 in May, down 4 percent from 12 months before.  
(Well, what kind of reporting is this?  A 50% local 
downsizing mirrors a 4% ww downsizing?  Can the guy 
do any math at all?)
HP famously emerged from a Palo Alto garage 75 years 
ago, growing into a computing powerhouse whose stock 
peaked during the tech bubble of the 1990s. (not exactly.  
HP stock was uncommonly quiescent during the tech 
bubble of the 1990s since it missed the bubble.  Cisco 
and Intel (and Sun Micro) caught the bubble; their stock 
today is still less than half their 2000 prices; not much 
different than HP).  Its shares have tripled in value since 
November of 2012, when it hit an 18-year low. The stock 
is still only worth about half the all-time high it reached in 
2000 (Cisco's is one-third, Intel's 45%, Sun non-existent). 
HP's market cap is about $66 billion, based on 
Friday's closing price of $35.20.
It has been at the center of several executive office storms
and strategic missteps over the past 10 years.
On the boardroom side are the notable firings of CEOs 
Carly FiorinaMark Hurd and Apotheker and a scandal 
involving spying on board members and reporters. 
Among its strategic mistakes, HP bought Palm after 
missing the shift to mobile computing. (Again, shoddy 
reporting.  HP had not (yet) missed the mobile computing 
boom; they announced the TouchPad before Apple 
announced the iPad but couldn't deliver.  They bought 
Palm before the iPhone (with the iPhone 3 was successful.  
Palm's Pre was a far better phone than anything on the 
market, but the iPhone 3 scooped the field with the App 
Store, which of course made it "not a Phone, but a 
platform).  't also overpaid wildly for British software 
company Autonomy, which led to an $8.8 billion 
writedown and resulting shareholder lawsuits (no 
argument here.  Autonomy was a dumb Dumb DUMB 
move, indulged by Apotheker apparently who loved the 
Europeaness of the deal.  Attensity, locally, especially 
after they bought Insight, was a far better technology, 
far smarter customers, and far cheaper.  
But no one asked me).
Whitman has tried to push HP into the areas where
technology is evolving, such as cloud computing,
without notable success yet. She has shored up its
stock through a series of job cuts and cost reductions.
After trying to revive HP and keep it whole through 
those moves, she and the board have apparently 
decided the time has come for a complete split 
between the sides of the business that are declining 
and the parts that have the best growth prospects 
going forward  (this is nervy, to pronounce one side a 
loser right off the bat.  Especially with HP taking back 
the PC dynamic in the last 135 days from Lenovo, and 
major printing announcements imminent.  But it is the 
conventional wisdom of the pundits, so we're stuck 
with it for now).
Cromwell Schubarth is the Senior Technology Reporter

at the Silicon Valley Business Journal.

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