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, includingeBayInc. 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 EMCCorp. 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.
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.
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.
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.
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.
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.
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.
Chuck House, shown here with son Warren, is co-author with Raymond Price, of THE HP PHENOMENON: INNOVATION and BUSINESS TRANSFORMATION (2009, Stanford University Press). He is Exec Director of InnovaScapes Institute, which published his memoir of HP Colorado Springs, PERMISSION DENIED, in 2013. House, Chancellor Emeritus of Cogswell Polytechnical College, was also executive director of Media X, Stanford University's research program on innovation, media and technology. Previously director of Intel Corporation’s Virtual Collaboratory, EVP R/D at Dialogic, President of Spectron Microsystems, SVP at Veritas Software and Informix Software after 29 years at Hewlett-Packard in a wide variety of roles. An IEEE Fellow for Logic Analysis technology, he also was President of ACM, the world’s largest Computer Science society, and is an ACM Fellow. He holds HPs only Medal of Defiance, awarded by David Packard for "extraordinary contempt and defiance beyond the normal call of engineering duty". Other awards include Engineer of the Year, Smithsonian Wizard of Computing, Top 50 inventions of 20th century, CNN top 25 inventions of past 25 years, Intrapreneuring Honor Roll