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Hewlett-Packard splits off PC, printer businesses

Hewlett-Packard Co said it would split into two listed companies, separating its computer and printer businesses from its faster-growing corporate hardware and services operations.

business Updated: Oct 07, 2014 01:06 IST
Yashwant Raj

Hewlett-Packard, the iconic US company that started the born-in-a-garage trend in Silicon Valley, announced on Monday that it was splitting into two companies.

The first, to be called Hewlett-Packard Enterprise, will focus on business-oriented technology such as servers and data storage equipment, services and software.

The second, simply called HP Inc, will focus on personal computers and printers. It will retain the company logo.

The separation will be through around the fall of 2015.

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Company sources said on the condition of anonymity that it will take at least 15 months to assess the impact of the decision on its India operations. The global major may end up operating as two different companies in the country, they added.

“Our work during the past three years has significantly strengthened our core businesses to the point where we can more aggressively go after the opportunities created by a rapidly changing market,” Meg Whitman, chief executive officer, HP, said in a statement. “The decision to separate into two market-leading companies underscores our commitment to the turnaround plan.”

Hewlett-Packard founded in 1939 by Bill Hewlett and Dave Packard in the latter’s garage in Palo Alto, California — the garage has been preserved as an important IT landmark.

The other garage-born IT behemoths include Apple, whose co-founder Steve Jobs had actually called Hewlett — directly and spoken to him — for some spare parts.

Whitman will be the president and CEO of HP Enterprise. She will also head the board of HP Inc, which will have Dion Weisler as president and CEO.

Both companies will be publicly traded, said HP. And each will be roughly the same size — $50 billion in annual revenues.

Whitman, who took over as CEO in 2011, had opposed a split earlier, arguing it would cost the company its negotiating clout as one of the largest buyers of microchips and computer parts.

She acknowledged the reversal in her position, saying on a call with analysts, according to The Wall Street Journal, “Being nimble is the only path to winning.”

Markets welcomed the announcement, giving company’s stocks a decent rise in Monday morning trading. Shares of the 75-year-old company, which has struggled to adapt to the new era of mobile and online computing, were up 4.4% at $36.78 in late morning trading on Monday.

However, analysts at Bernstein Research also warned of “material negative synergies” and one-time costs associated with the spinoff, largely in purchasing but also in distribution. The separation, they said, was fuelled by weakness, not strength. Speculation about the break-up started on Sunday with a report in the Journal, which had earlier said HP was in merger talks with EMC Corp, a maker of data-storage equipment.

HP said it planned to cut 5,000 more jobs as part of its multi-year restructuring, raising the total under Whitman to 55,000. The company currently has more than 300,000 employees.