Hewlett-Packard planning breakup to become nimbler

Hewlett-Packard is splitting into two companies, using a breakup to become nimbler after failing to keep up with the shift away from the printing and personal computing businesses it pioneered.

Chief executive 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.

Whitman is reversing an earlier position that the company should remain a single enterprise. When she took the helm in September 2011, as the fourth CEO in 2½ years, she ended plans by her predecessor to spin off the PC unit.

Hewlett-Packard, which had set the pace in computers for decades, had embarked on a rapid expansion plan through acquisitions — some of them controversial — followed by tumultuous years of strategy shifts, cost cutting and reduced profit targets.

Now Whitman is pursuing the kind of spinoff plan that’s gathering steam at other technology companies.

Hewlett-Packard’s 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.

Planned job cuts will increase to 55,000 and costs to restructure will be about $600 million (€474,000). That’s compared with as many as 50,000 previously projected, Hewlett-Packard said in a presentation.

Leo Apotheker had succeeded Mark Hurd, who left in August 2010 after the board said Hurd violated Hewlett-Packard’s code of business ethics.

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.

Under Apotheker, Hewlett-Packard acquired UK software company Autonomy, a deal that resulted in the company taking a $8.8bn writedown in 2012 and mired the company in lawsuits to this day.

Carly Fiorina, Hurd’s predecessor and the first outsider hired for the CEO job, in 1999 sold Agilent Technologies, the electronic instruments division closest to the company’s roots.

Two years later, Hewlett-Packard bought Compaq Computer, the PC manufacturer. Fiorina was fired in 2005 after she missed Wall Street’s numbers too often.

The idea of Hewlett- Packard spinning off or separating the printers and PCs businesses has come up in discussions between EMC and Hewlett- Packard, one source said. The plan would have been to have a combined company focusing on storage, servers, software and security, the person said.

Hewlett-Packard’s printing and personal systems group reported $55.9bn in revenue in the company’s latest fiscal year, compared with $55.6bn for the technology solutions group, which provides systems support and consulting for other companies.

The PC and printing had a combined operating profit of $4.84bn, while the corporate services division had operating income of $5.85bn.


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