Hewlett-Packard Enterprise and HP Inc: PC-maker to break up into two new firms

 
Oliver Smith
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Meg Whitman: We will be in a better position to compete in the market
Hewlett-Packard (HP) will split into two publicly listed companies, the PC-maker said yesterday, separating its computer and printer units from its corporate hardware and services arms.
Investors in the struggling tech giant celebrated the move as shares rose 4.7 per cent on news of the plan, to close up at $36.87 in New York.
Management also indicated the split could give HP scope to pursue further mergers and acquisitions. HP has rep­ortedly been in merger talks with EMC, the biggest maker of corporate data storage equipment, for some time.
HP’s finance chief Cathy Lesjak on a call following the split announcement said: “We do believe we have more flexibility on M&A. We will be actively looking at M&A throughout the year.”
Shareholders will take a stake in both businesses by the end of fiscal 2015.
“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,” said CEO and chairman Meg Whitman, who will run the Enterprise business.
HP also said it planned to cut 5,000 more jobs as part of its multi-year restructuring, raising the total under Whitman to 55,000.
Although cheered by the market, the move was far from universally praised, and rating agency Standard & Poor’s put HP’s triple-B-plus credit rating on review for a possible downgrade.
“Both the PC and printer and enterprise operations have seen declining revenue, and many are likely to question whether independence can change their fortunes,” said CCS Insight analyst Arnaud Gagneux.
“The cost of the separate marketing, finance and purchasing departments for the two entities will increase HP’s spending, and the loss of some economies of scale may affect HP when purchasing components.”


Dion Weisler will lead HP Inc

HP'S NEW CORPORATE STRUCTURE

HEWLETT-PACKARD ENTERPRISE
  • Led by current HP chief executive Meg Whitman
  • Will contain its software and corporate hardware business
  • Likely to continue the legal tussle with Autonomy

HP INC

  • Led by current HP vice-president Dion Weisler
  • Will contain its printing and personal computer business

Total job cuts from the company will rise to 55k

The split will cost $600m

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