Hewlett-Packard Plans
to Break in Two
Split Would Separate PC, Printer
Operation From
Corporate Hardware, Other Units
Hewlett-Packard Co. plans to break in two, separating
its personal-computer and printer businesses from its
corporate hardware and services operations, accord-
ing to people familiar with the matter.
The company plans to announce the move as early as
Monday, the people said. It is expected to be effected
as a tax-free distribution of shares to the company’s
stockholders next year, one of the people said.
HP 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 stock-
holders 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.
Ralph Whitworth, an H-P investor who until recently was its
chairman, said about the news in a text message Sunday:
“This would be a brilliant move at just the right moment in the
turnaround. It would liberate significant trapped value.” As of
June, the firm Mr. Whitworth co-founded, Relational Investors
LLC, owned a roughly 1.5% stake in the company.
The impending move, first reported Sunday by The Wall
Street Journal, set off a round of speculation in the industry
about whether the separation could lead to more deal making.
The Journal recently reported that for much of the past year,
H-P held talks to merge with data-storage equipment maker
EMC Corp. a deal that would have created an industry giant
with a market value of roughly $130 billion. Although the talks
recently ended, the separation could pave the way for H-P’s
corporate hardware and services business to ultimately be
combined with EMC, industry observers said.
The planned breakup is one that Palo Alto, Calif.-based H-P
and its investors have long contemplated. H-P came close to
hiving off its PC operation in 2011, when it announced the
ill-fated acquisition of U.K. software company Autonomy Corp.
H-P said then it was exploring a separation of its PC business,
only to decide two months later to hold on to it amid pressure
from shareholders, which led to the departure of then-Chief
Executive Leo Apotheker.
H-P in 1999 spun off Agilent Technologies, a maker of
electronic-testing gear and other hardware. Agilent
subsequently announced plans to break itself up.
its personal-computer and printer businesses from its
corporate hardware and services operations, accord-
ing to people familiar with the matter.
The company plans to announce the move as early as
Monday, the people said. It is expected to be effected
as a tax-free distribution of shares to the company’s
stockholders next year, one of the people said.
HP 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 stock-
holders 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.
Ralph Whitworth, an H-P investor who until recently was its
chairman, said about the news in a text message Sunday:
“This would be a brilliant move at just the right moment in the
turnaround. It would liberate significant trapped value.” As of
June, the firm Mr. Whitworth co-founded, Relational Investors
LLC, owned a roughly 1.5% stake in the company.
The impending move, first reported Sunday by The Wall
Street Journal, set off a round of speculation in the industry
about whether the separation could lead to more deal making.
The Journal recently reported that for much of the past year,
H-P held talks to merge with data-storage equipment maker
EMC Corp. a deal that would have created an industry giant
with a market value of roughly $130 billion. Although the talks
recently ended, the separation could pave the way for H-P’s
corporate hardware and services business to ultimately be
combined with EMC, industry observers said.
The planned breakup is one that Palo Alto, Calif.-based H-P
and its investors have long contemplated. H-P came close to
hiving off its PC operation in 2011, when it announced the
ill-fated acquisition of U.K. software company Autonomy Corp.
H-P said then it was exploring a separation of its PC business,
only to decide two months later to hold on to it amid pressure
from shareholders, which led to the departure of then-Chief
Executive Leo Apotheker.
H-P in 1999 spun off Agilent Technologies, a maker of
electronic-testing gear and other hardware. Agilent
subsequently announced plans to break itself up.
In 2012, under current H-P Chief Executive Meg Whitman,
the company reorganized itself to combine the PC business
with its more profitable printer operation, helping pave the
way for the current plan.
the company reorganized itself to combine the PC business
with its more profitable printer operation, helping pave the
way for the current plan.
Ms. Whitman is slated to be chairman of the PC and printer
business, to be known as HP Inc., and CEO of the other
company, to be called Hewlett-Packard Enterprise, said
one of the people familiar with the plan. Current lead
independent director Patricia Russo will be chairman of
the enterprise company, while Dion Weisler, an executive
in the PC and printer operation, is to be CEO of that business,
this person said.
business, to be known as HP Inc., and CEO of the other
company, to be called Hewlett-Packard Enterprise, said
one of the people familiar with the plan. Current lead
independent director Patricia Russo will be chairman of
the enterprise company, while Dion Weisler, an executive
in the PC and printer operation, is to be CEO of that business,
this person said.
In the 2013 fiscal year ended last October, the Printing and
Personal Systems Group, as it is known, reported $55.9 billion
in revenue, about half of H-P’s total. Sales for the operation
dropped 7.1% amid fierce competition, compared with a 6.7%
decline for company revenue as a whole. (odd they don't break out PCs and printers, and talk profits)
Last year, H-P lost its place as the largest PC maker by ship-
ments, slipping to No. 2 behind China’s Lenovo Group Ltd,
according to industry research firm IDC.
ments, slipping to No. 2 behind China’s Lenovo Group Ltd,
according to industry research firm IDC.
H-P, founded in a garage in Palo Alto 75 years ago, has
been undergoing a multiyear restructuring under Ms.
Whitman in an effort to stem sales declines. Aside from
the PC and printer business, H-P’s revenue comes from
selling services and hardware such as servers and data-
storage systems to corporations, along with software and
financial services.
been undergoing a multiyear restructuring under Ms.
Whitman in an effort to stem sales declines. Aside from
the PC and printer business, H-P’s revenue comes from
selling services and hardware such as servers and data-
storage systems to corporations, along with software and
financial services.
H-P’s shares have risen sharply since the beginning of
last year, but they remain well below their highs in recent
years—and the even loftier levels they reached during the
1990s tech boom (in common with virtually every other high-tech firm still surviving, such as Intel, Cisco,
Microsoft, Oracle). H-P shares increased 2% on Friday to
$35.20, giving it a market capitalization of nearly $66 billion.
In response to lower sales and to provide a lift to its shares,
H-P has laid off tens of thousands of employees and cut
other costs. Ms. Whitman has sought to push H-P further
into growth pockets such as “cloud” software, but the
company has struggled to make headway in such areas.
H-P has laid off tens of thousands of employees and cut
other costs. Ms. Whitman has sought to push H-P further
into growth pockets such as “cloud” software, but the
company has struggled to make headway in such areas.
The recent wave of breakups and spinoffs at technology
companies and in the wider corporate world has been
fueled by the idea that companies with a narrower focus
perform better. The moves in many cases have been
well-received by shareholders—and sometimes actively
sought by them.
companies and in the wider corporate world has been
fueled by the idea that companies with a narrower focus
perform better. The moves in many cases have been
well-received by shareholders—and sometimes actively
sought by them.
Last Tuesday, online-auction pioneer eBay, where Ms.
Whitman was once CEO, announced a plan to spin off
its PayPal payments-processing unit. Shareholders
rewarded eBay’s decision, pushing the company’s shares
up about 7.5% that day.
Whitman was once CEO, announced a plan to spin off
its PayPal payments-processing unit. Shareholders
rewarded eBay’s decision, pushing the company’s shares
up about 7.5% that day.
—Shira Ovide contributed to this article.
CHH COMMENT: IT's ABOUT TIME
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