On Monday, the company formerly known as Hewlett-Packard announced to investors that they will be splitting the company into two separate entities with different goals. The two companies will be called Hewlett-Packard Enterprise and HP Inc.
Hewlett-Packard Enterprise will sell servers, storage, networking, converged systems, consulting services, and general enterprise solutions. It will be lead by HP’s current CEO, Meg Whitman. HP Inc. will continue HP’s consumer PC and printer business. Dion Weisler, current VP of HP’s Printing and Personal Services Division, will be its CEO. Whitman will serve as nonexecutive chairman, retaining substantial power at both companies.
Whitman told investors HP Inc. would be “milked for cash” and continue on its current trajectory, while the enterprise company will be operated for growth through new products and services, and acquisitions. HP’s stock rose 5.9% following the announcement.
Three years ago, when HP was in truly dire straits, the company also considered “spinning off” their PC business. Whitman vetoed the plan at the time, arguing that the company was stronger together. She then defended her decision on Monday, saying HP was too financially weak for a breakup at the time, and under her watch, the company grew strong enough that a breakup makes sense. She says Hewlett-Packard Enterprise may now “more aggressively go after the opportunities created by a rapidly changing market.”
Splitting up seems to be the popular move for companies too big for their own good.
In 2012, Motorola divided its company into two distinct companies: Motorola Solutions, for the enterprise market, and Motorola Mobility, for the consumer smartphone market and cable set-top boxes. The move came after Motorola’s flailing smartphone sales caused investors’ concern that the company was losing direction, and the premise that two companies with clearly defined goals were better than one that encompassed all those goals. It’s hard to say whether the split ultimately helped Motorola’s smartphone company in the long run, but the enterprise solutions company experienced steady growth following the split, making the choice to purchase stock an easier one.
HP’s split, while comforting for investors, shows an enhanced focus in the money-making aspects of its business, and subsequently, a lack of confidence in its PC and printer business. Whitman pushed HP Inc. to the wayside in her conference with investors today, and it’s clear that their money is not in PCs anymore. Enterprise will most likely continue to make money behind the scenes, as it’s not a consumer-facing business. With declining sales since the advent of the tablet market, HP Inc. will need to come through with a new strategy for laptops and desktops, and maybe tablets, if it hopes to reclaim the position it once had in the market. IBM, Microsoft, and Dell have had to make dramatic changes in their leadership, sold parts of their business, or gone private in the last year to keep up with the technology landscape’s increasing mobile and cloud-computing focus. Now HP is being forced to jettison the aspect of their company that they became most known for in later years.
Be First to Comment