By the time you read this, the Wall Street Jourmal report may give way to Hewlett-Packard's own announcement: HP will break off its pc and printer businesses from corporate hardware and services operation.
This is not a new idea and was most recently explored during merger talks with storage giant EMC Corp. The merger talks died, but the concept of an HP bifurcation lived on.
In 2011, HP decided to dump the pc business under then-Chief Executive Léo Apotheker.
He lost his job because of that decision (mainly). HP's new CEO, Meg Whitman, won a pc industry popularity contest by reversing course.
She re-organized HP, combining the PC business with its more profitable printer operation. Now Whitman will be chairman of the PC and printer business and CEO of the separate "enterprise compan."
Business Insider says the new enterprise company will include:
- Enterprise Group (servers, networking hardware and storage. In the first nine months of its fiscal 2014, this unit earned $20.5 billion with a 14% margin)
- Enterprise Services (consulting services and outsourcing with $16.9 billion with a 2.5% margin)
- Software, ($2.9 billion with 19% margin)
- HP Financial Services
WSJ sources say Patricia Russo will be chairman of the enterprise company. Dion Weisler, an executive in the PC and printer operation, is to be CEO of that business. [Photo below.]
While H-P lost its place as the largest PC maker by shipments, in fiscal 2013 the printing and personal systems group hit $55.9 billion in sales, about half the company’s total. The company as a whole declined 6.7%.
This deal will be sold as "companies with a narrower focus perform better." For a recent example, EBAY just spun off its PayPal unit.
What we really have here is a case of management failure. The HP Board and top executives failed to turn around HP despite a multi-year restructuring. And what do executives do to save their own jobs (and reputation)?
They re-structure again, in a bolder move they know Wall Street will cheer. But it is a corporate sleight-of-hand, a trick that focuses attention away from the real problem.
HP is living in the past and NOT coming to grips with a world driven by mobile, internet, and cloud. HP is not a brand that Generation X embraces. HP is not leading in Internet-of-Things, 3D printers, or any of the other new cutting edge technology.
Splitting HP will only make two uninspired companies, malingering under the management that failed to create true change.
Additionally, the split into raises complex issues for partners and customers. When an HP partner sold a client system plus an enterprise system, it was an added-value deal that made the deal more profitable for partners. Now with two separate companies, the partners and customers will suffer.
We'll leave you with words from three years ago, when new CEO Meg Whitman said the decision to keep the personal systems business with HP was "very straightforward."
"A separation would not create incremental shareholder return or customer value...PSG is core to HP's portfolio, and it makes strategic, financial, and operational sense for HP to retain it. Specifically, PSG benefits from HP's global reach, scale, and innovation. It contributes significantly to HP's supply chain efficiencies,component pricing, distribution channels, and solutions portfolio."
In our opinion, someone is taking a great company and splitting it in two because...they ran out of time with Wall Street and never managed to transform HP to meet the new era.
Go Wall Street Journal Breaks the HP News