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HP takes huge step - a split is coming

08 Oct 14

Rumours that HP is to split into two have been confirmed: the company is to divide to become a PC and printer business on the one hand, and an enterprise technology provider on the other. The mitosis is expected to be complete in around a year: by November 2015, the behemoth as we know it will be no more.

The Wall Street Journal has the story, confirming that the two entities emerging from the split are HP, Inc and and HP Enterprise. The former will see to printers and PCs, while HP Enterprise focuses on servers, storage, software, consulting and other higher-end technology.

Each company will be listed separately on the New York Stock Exchange, with current CEO Meg Whitman staying on as boss of Enterprise, while Dion Weisler, current top man at the Personal Systems and Printing (PPS) group, is to head up HP Inc.

The motivation for the split is to improve the ability of the respective entities to respond with more agility in the competitive environments in which they participate. Whitman has also indicated that there may be room for some merger and acquisition activity post-split, with names like EMC and Rackspace featuring as potential dance partners.

Of course, HP has a somewhat disastrous M&A record, starting with its 2001 acquisition of Compaq. The subsequent write-down of over a billion dollars hurt when it came 11 years later, but soon looked like chump change as EDS destroyed $8-billion of shareholder value. That ignominious high wasn’t to last, soon superseded by the Autonomy disaster and a further $8.8 billion down the gurgler.

In spinning out its printer and PC business from the enterprise, HP sets off down a well-worn path trodden by the likes of IBM; however, unlike Big Blue, HP evidently still sees value in consumer IT, including laptops, tablets and other end point devices.

HP has endured a torrid few years, locally and internationally. In New Zealand, the company recorded a loss of $14.7 million in the year ended October 31, on sales which declined 14%. That was an improvement of sorts from the 2013 loss of $92.5 million.

Globally, HP has struggled for some time, with declining sales in no fewer than 11 consecutive quarters, led by the contracting (and highly competitive) PC market, and declining printer sales. If ever HP, Inc needed agility, now is certainly the time.

Comment was sought from the local HP office, but that was quickly smacked down by HP Corporate, which made it clear that schtum’s the word. A spokesperson said only that ‘all information on the announcement can be found in the press release here’.

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