Hewlett-Packard to split into two companies
Hewlett-Packard Co. unveiled plans to split into two companies, becoming the latest technology company to seek a new structure in order to remain competitive.
Chief Executive Officer Meg Whitman will lead Hewlett-Packard Enterprise, a new company focusing on corporate hardware and services, while Dion Weisler, the vice president in charge of personal-computer and printer operations, will become CEO of that business, called HP Inc., Hewlett-Packard said in a statement today.
By separating Hewlett-Packard into two businesses, Whitman is reversing her position that the company should remain a single enterprise. In 2011, the newly appointed CEO ended plans by her predecessor Leo Apotheker to spin off the PC unit.
Efforts to spin off businesses are gathering steam at other technology companies. Last week, EBay Inc. announced that it would spin off its PayPal unit. EMC Corp., a maker of storage computers, is exploring strategic options that could include a full or partial sale, or a spinoff of VMware Inc., and has also held merger talks with Hewlett-Packard, people familiar with the matter have said.
International Business Machines Corp. has been shedding its hardware operations, including selling its PC unit to Lenovo Group Ltd. in 2005 and its low-end server unit to the Chinese company this year.
Tax-Free Deal
The breakup will be a tax-free distribution of shares to shareholders. Whitman will also become chairman of the PC and printer company, while current lead independent director Patricia Russo will be chairman of the enterprise unit, Hewlett- Packard said.
The shares rose almost 7 percent to $37.65 in early U.S. trading. They are up 26 percent this year through Oct. 3, after almost doubling in 2013.
The idea of Hewlett-Packard spinning off or separating the printers and PCs businesses has come up in discussions between EMC and Hewlett-Packard, a person familiar with the matter said. The plan would have been to have a combined company focusing on areas such as storage, servers, software and security, the person said.
Whitman has been introducing new products and cutting jobs since she took over as CEO in September 2011, seeking to turn around the iconic Silicon Valley company. Planned job cuts will total 55,000, compared with as many as 50,000 previously projected, Hewlett-Packard said in a presentation today. The company has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets, and last year lost its place as the largest maker of PCs to Lenovo.
Profit Forecasts
Hewlett-Packard's printing and personal systems group reported $55.9 billion in revenue in the company's latest fiscal year, compared with $55.6 billion for the technology solutions group, which provides systems support and consulting for other companies. The PC and printing had a combined operating profit of $4.84 billion, while the corporate services division had operating income of $5.85 billion.
Earnings per share for the year through October 2015 will be in a range of $3.23 to $3.43, Hewlett-Packard said today. Profit in the current financial year will be $2.60 to $2.64 a share, it said today.
The company said it has postponed a meeting with financial analysts scheduled for Oct. 8 in San Jose.
Goldman Sachs & Co. is Hewlett-Packard's financial adviser and Wachtell, Lipton, Rosen and Katz is providing legal assistance.
--With assistance from Cornelius Rahn in Berlin.
To contact the reporter on this story: Jack Clark in San Francisco at jclark185bloomberg.net To contact the editors responsible for this story: Pui-Wing Tam at ptam13bloomberg.net Reed Stevenson, Kenneth Wong