Technology giant Hewlett-Packard announced its plans to break in two parts, separating its PC and printer businesses from its corporate hardware and services operations.
The Silicon Valley stalwart has struggled to adapt to the new era of mobile and online computing is now to put more focus on the faster-growing corporate services market, according to a Wall Street Journal report on Sunday.
The splitting, which could be voiced publicly on Monday, is expected to 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 this fiscal year.
“HP’s printing and personal computing business accounts for about half its revenue and profit, according to last quarter’s financial results. It is not clear how many of HP’s more than 300,000 staff work in each of the planned businesses,” Reuters says.
“Founded by Bill Hewlett and Dave Packard in a Palo Alto, California garage in 1939, HP was one of the companies that shaped Silicon Valley and the PC revolution. Lately, however, it has struggled to adapt to the shift towards mobile computing, and it has been overshadowed by younger rivals. HP’s market value of $66 billion is dwarfed by Apple Inc’s $596 billion and Microsoft Corp’s $380 billion,” the publication adds.
Hewlett-Packard appeared to be the latest one in a line of companies, who often under shareholder pressure and influence, decided to spin off operations to become more agile and to capitalize on faster-growing businesses. Last week online auction company eBay Inc said it would spin off electronic payment service PayPal.
HP and some of its investors have long considered such a move, sources familiar with the issue unveiled. As one of the older big computer companies, for several years HP directors have discussed ways to restructure to keep up with technology upstarts.
Another source noted that the Silicon Valley giant had held a round of talks with storage and cloud-computing firm EMC recently, seeking ways of moving more forcefully into online services.
Many investors and analysts have called for a break-up of the company, or a sale of the personal computer business, so that HP could focus on the more profitable operations of providing computer servers, networking and data storage to businesses.
“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 commoditization forces prices down further.”
Rumors claim that current HP CEO Meg Whitman tis likely to become CEO of the new so-called enterprise company and also be chairman of the PC and printer company while current HP lead independent director Patricia Russo would be chairman of the enterprise company. The CEO of the PC and printer company would be Dion Weisler, who is currently an executive in that division, the report said.