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HP SPLITS AS TECH WORLD SHIFTS

Dividing into PC- and business-focused companies will give each an edge, HP says.

New York Times

Hewlett-Packard confirmed Monday that it plans to break into two companies.

HP said in a news release that it intends to divide itself into a company aimed at business technology - including computer servers and data storage equipment, software and services - and a company that sells personal computers and printers.

Both companies will be publicly traded. The business-oriented company will be called Hewlett-Packard Enterprise, while the PC company will be called HP Inc. and will retain the company's current logo. The transaction is expected to be completed by October 2015, the end of HP's fiscal year, the company said.

In a statement, Meg Whitman, HP's chief executive, said the company is splitting up to "more aggressively go after the opportunities created by a rapidly changing market."

Although Whitman, who became chief executive in 2011, depicted the historic decision as a natural part of her five-year turnaround plan, she had previously resisted the idea of breaking up the company. HP has been one of the world's top buyers of semiconductors and other computer parts, she had argued, giving it pricing power superior to its rivals'.

But on Monday, she said dividing in two"will provide each new company with the independence, focus, financial resources and flexibility they need to adapt quickly to market and customer dynamics." This will make the companies more competitive, she said.

Whitman will retain much power at both companies. She will be chief executive of Hewlett-Packard Enterprise and will serve as nonexecutive chairman of HP Inc. Patricia F. Russo, currently a director of HP, will be chairwoman of Hewlett-Packard Enterprise. Dion Weisler, now head of HP's printing business, will be president and chief executive of HP Inc.

The company also added to the number of its prospective job cuts. In an earlier conference call with analysts, it said it had "identified opportunities for incremental improvements" in its plan to eliminate a total of 50,000 jobs through layoffs and retirements. It now expects the number to be 55,000.

"HP's board and management have made a brilliant value-enhancing move at the perfect time in the turnaround," Ralph V. Whitworth, founder of Relational Investors and a former Hewlett chairman, said in a statement Monday. "The new companies will be better positioned to address today's light-speed market dynamics and customer needs, and with distinct and compelling financial profiles and strong leadership teams, accelerate growth and shareholder value creation."

The company's shares closed Monday at $36.87, up 4.7 percent.

In a little more than a year, stalwarts such as Microsoft, IBM and Dell have changed chief executives, sold big parts of their businesses or gone private. All of them, along with a host of other companies that became behemoths during a 20-year boom in personal computing and the Internet, are rushing to cope with the rise in mobile devices connected to cloud systems.

HP was long the world's largest computer company, though there has been turmoil in recent years. The two businesses resulting from the proposed split will almost evenly divide HP's fiscal 2013 revenue of $112 billion. On their own, each would easily fit into the top half of the Fortune 500.

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