Hewlett-Packard confirms to split in two by end-FY2015

Hewlett-Packard confirms to split in two by end-FY2015

Hewlett-Packard has confirmed that it will split into two separate, listed companies by separating its computer and printer businesses from its corporate hardware and services operations by the end of fiscal year 2015.

NEW YORK: Hewlett-Packard said on Monday (Oct 6) it would split into two separate, listed companies by separating its computer and printer businesses from its corporate hardware and services operations. The move follows a trend of technology firms and other corporations, including eBay last week, splitting their businesses into separate companies, based on the belief that tightly focused firms perform better.

The split "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," said HP chief executive Meg Whitman in a statement.

"In short, by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders," she said. It will take place as a tax-free distribution of shares to HP's stockholders.

Whitman will serve as chairman of the PC and printer business, dubbed HP Inc, and chief-executive of the separate Hewlett-Packard Enterprise company, the statement said. Dion Weisler, an executive in the PC and printer operation, is to be chief executive of that streamlined business, the report said.

HP has been undergoing a massive reorganisation to cope with the move away from traditional personal computers to mobile devices. The California company, which has been in the throes of a major reorganization since 2012, said on Monday the plan would eliminate a total of 55,000 jobs "independent of the separation transaction." Until recently, HP had said the plan would cut up to 50,000 jobs.

The breakup plan, subject to final board approval, is expected to be completed by the end of the 2015 fiscal year. The decision follows US online retail giant eBay' plans unveiled last week to spin off PayPal in a move designed to help the unit compete better in the fast-moving online payments segment.

HP shares jumped four per cent to 36.61 in opening trades, as initial reaction to the announcement was generally positive.

Brian White, analyst at Cantor Fitzgerald, said there is a "long list of reasons" to separate the two units. "The enterprise IT market is becoming increasingly competitive and the PC market has been in a downturn since the iPad was unveiled in April 2010," White said in a note to clients.

"Given the challenges in managing a company the size of HP, the negative, long-term secular trends in the PC market that discourage investor attention, and the need for HP to focus more on the cloud, ... we believe a separation into two companies makes sense, as we have suggested for quite some time."

Sherri Scribner at Deutsche Bank agreed, saying there were "limited synergies" between the two segments and that each unit has "different growth and margin profiles". Ben Reitzes at Barclays said the spinoff "could expand HP's value" but that it was "not a signal that fundamentals are about to change drastically for PCs."

- AFP/al

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