Hewlett-Packard to split into two for sharper focus

Hewlett and Packard are finally going their separate ways. Not literally, of course, as the founders of the Silicon Valley technology conglomerate that bears their names have long shuffled off this mortal coil. But the company now led by Meg Whitman is set to break in two.

HP, which has a market value of $66 billion, will announce as soon on October 6 plans to separate its business manufacturing laptops, computers and printers from the one that serves large corporate and government customers with hardware and services, the Wall Street Journal reports.

While a big move for a slow-moving company founded in 1939, it's actually a bit behind the curve as far as shareholders are concerned. They have been expecting just such a split for some time. Whitman's predecessor proposed a similar measure back before he was shown the door. And it was one of the options that Ralph Whitworth, the activist shareholder at Relational Investors who became HP's chairman until taking a leave in July, wanted HP to consider.

Reuters Breakingviews argued nearly two years ago that the company's assets would be worth almost double its then-market capitalization in a breakup. Investors appear to have agreed, sending HP shares up from about $13 in December 2012 to $35 today.

Whitman could have continued to argue that there were synergies in duct-taping a consumer hardware business endangered by the age of mobile computing with a potentially more stable operation focused on solving the complicated problems of large enterprises. The printing and personal systems unit saw sales slip some 7 per cent last year.

Using the recent revival in its stock-market fortunes to perform surgery, rather than go with the flow, is a smart move by HP's board. Better to perform the operation voluntarily than be forced into it by disappointing earnings or a crack in the market. It also allows Whitman to hedge her bets. She will be CEO of the corporate IT business and chair the hardware unit. In all other respects, however, Hewlett and Packard are set to finally part company.

Hewlett-Packard, which has struggled to adapt to the new era of mobile and online computing, plans to split into two companies as it looks to put more focus on the faster-growing corporate services market, the Wall Street Journal reported on Oct 5.

The move, which could be announced as early as October 6, would be a monumental reshaping of one of technology's most important pioneers, which still has more than 300,000 employees and is on track to book $112 billion in revenue in the year to October.

Under the reported plan, HP will separate its computer and printer businesses from its corporate hardware and services operations, and spin the unit off through a tax-free distribution of shares to stockholders next year. Meg Whitman, HP chief executive, will be chairman of the computer and printer business and CEO of the other business.

A company spokeswoman declined to comment on the report.

HP's printing and personal computing business accounts for about half its revenue and profit, according to results for the most recent financial quarter. It is not clear how many of HP's more than 300,000 staff work in each of the businesses.

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