Strategy & Operations » Governance » HP confirms plan to split business in two

HP confirms plan to split business in two

Hewlett-Packard Enterprise and HP Inc to form new companies

HP IS TO SPLIT its business into two separate units in a move that revives a plan once put in place by former CEO Léo Apotheker in 2011, before being shelved.

The split will see the creation of a new company focused on consumer hardware and printing services, leaving the other unit to focus on enterprise hardware and software services, reports sister brand V3.

The split will see the creation of a company called Hewlett-Packard Enterprise that will focus on enterprise technology infrastructure, software and services businesses.

The second will do business as HP Inc and focus on printing and hardware systems aimed at consumers. HP Inc will retain the company’s current logo for its operations.

Meg Whitman, chief executive of HP, said the move was a key part of her ongoing efforts to improve the company’s position in the market, and would offer more flexibility to each new business.

“The decision to separate into two market-leading companies underscores our commitment to the turnaround plan,” she said.

“It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders.”

Whitman will become the CEO of Hewlett-Packard Enterprise while Dion Weisler, current executive vice president of HP’s Printing and Personal Systems business, will be CEO of HP Inc.

“As the market leader in printing and personal systems, an independent HP Inc will be extremely well positioned to deliver that innovation across our traditional markets as well as extend our leadership into new markets like 3D printing and new computing experiences,” said Weisler.

The move is a return to a strategy first instigated by Apotheker. At the time the plan was roundly criticised by some who said HP should not be turning its back on the hardware market.

Eventually Apotheker was dismissed and replaced by current CEO Whitman. She has put in place a radical transformation at the company, which has involved heavy lay-offs at locations around the world.

The move to shed the company of certain units is likely to be seen as another way to ensure its future and to focus more clearly on the enterprise market.

HP may feel compelled to slim down as its financial performances remain mixed. Third-quarter revenue for 2014 rose by one percent to $27.58bn but profits fell, dipping under the $1bn mark to $985m. Its printer unit was down four percent.

Peter Burris, vice president and research director at Forrester, said the move was necessary for HP to create two new businesses that are better able to focus on the needs of customers, especially in the enterprise space with software systems.

“The age of the customer is changing a lot of things in the tech industry, especially for companies like HP that feature an enormous portfolio traditionally focused on hardware and maintenance services,” he said.

“The pressure is on to shift the focus to software and related business technology services, which is where customers, investors, and partners see greater opportunity and value.”

The move follows on the heels of another company split that was announced last week, when eBay and PayPal said they would become two separate businesses in order to allow them both to focus on their own markets.

Was this article helpful?

Leave a Reply

Subscribe to get your daily business insights