HP to split into two companies as PC market declines
Mon 6 Oct 2014
Hewlett-Packard (HP) has announced its plans to split its business into two companies, after experiencing reported difficulties adapting its services to today’s fast-paced and diverse computing market.
The Wall Street Journal reported on Sunday that, in an effort to place more focus on its corporate solutions branch, a brand division would be actioned, separating HP’s computer and printer business from its corporate hardware and operations. People familiar with the plan told WSJ that the corporate unit would be divided through a tax-free distribution of shares to stockholders in the coming year.
An HP spokesperson declined to provide comment on the reports.
HP, still a leading figurehead in Silicon Valley, counts over 300,000 employees and is expected to break $112bn (£70bn) in revenue this fiscal year. According to last quarter figures, its printer and PC business accounts for around half of the company’s profit and revenue.
Despite its PC success, recently the once pioneering firm has struggled to move into a digital tech era defined by mobile and online technologies, overshadowed by younger, shinier contemporaries – HP’s market value of $66bn shrinking beside Apple’s $596bn.
WSJ reported that HP and some of its investors had been considering such a move for a long time, with directors concerned with the need for a restructured strategy in response to fresher competition.
The Journal also suggested that partnership discussions had been held lately with EMC, as HP increased efforts to improve its more profitable online and networking offering.
Although a division has been considered in the past, yesterday’s reports still came as a surprise to some experts.
“I wonder what would have changed in the board’s thinking that previously they thought they needed computers together with services to properly serve large enterprises to now,” said Hudson Square Research analyst Daniel Ernst.
“PCs and printing remain in long-term secular decline, and while HP has managed that business well, the challenges for that portion of the split company will only grow as the demand continues to erode, and commoditisation forces prices down further,” he added.
Patricia Russo, current HP lead independent director is expected to chair the enterprise business, with Dion Weisler, executive vice president, to assume the CEO role for the PC and print division.