HP wants to focus on the faster-growing corporate services market rather than the failing PC market

Hewlett-Packard to split into two companies

PC maker Hewlett-Packard says it will separate its computer and printer business from its corporate hardware and services operations.

The move is designed to put more focus on the faster-growing corporate services market, according to a Wall Street Journal report that predicted the move yesterday prior to this morning’s announcement.

HP's printing and personal computing business accounts for about half its revenue and profit, according to last quarter's financial results, but the unit will be spun off through a tax-free distribution of shares to stockholders next year.

The firm, founded by Bill Hewlett and Dave Packard in a California garage in 1939, was one of the firms that pioneered the PC revolution, but it has struggled to adapt to the mobile market and competition from cheaper foreign rivals like China’s Lenovo – now the world's number one PC maker by shipments.

Many investors and analysts have called for a break-up of the company, or a sale of the personal computer business, so that HP could focus on the more profitable operations of providing computer servers, networking and data storage to businesses.

A source familiar with the matter said HP had held merger talks with storage and cloud-computing firm EMC recently, as a way of moving more forcefully into online services.

HP did consider spinning off its PC division in 2011 under then-CEO Leo Apotheker, but ultimately decided against the idea, and company executives have said in the past that personal computers underpin and support the company as a whole.

"I wonder what would have changed in the board's thinking that previously they thought they needed computers together with services to properly serve large enterprises to now," said Hudson Square Research analyst Daniel Ernst.

"PCs and printing remain in long-term secular decline, and while HP has managed that business well, the challenges for that portion of the split company will only grow as the demand continues to erode, and commoditization forces prices down further."

The Journal, citing one of its sources, said the plans call for current HP CEO Meg Whitman to become CEO of the new so-called enterprise company and also be chairman of the PC and printer company. Current HP lead independent director Patricia Russo would be chairman of the enterprise company.

The CEO of the PC and printer company would be Dion Weisler, who is currently an executive in that division, the report said.
The move is designed to put more focus on the faster-growing corporate services market, according to a Wall Street Journal report on Sunday, but a company spokeswoman declined to comment on the news.

HP's printing and personal computing business accounts for about half its revenue and profit, according to last quarter's financial results, but the unit will reportedly be spun off through a tax-free distribution of shares to stockholders next year.

The firm, founded by Bill Hewlett and Dave Packard in a California garage in 1939, was one of the firms that pioneered the PC revolution, but it has struggled to adapt to the mobile market and competition from cheaper foreign rivals like China’s Lenovo – now the world's number one PC maker by shipments.

Many investors and analysts have called for a break-up of the company, or a sale of the personal computer business, so that HP could focus on the more profitable operations of providing computer servers, networking and data storage to businesses.

A source familiar with the matter said HP had held merger talks with storage and cloud-computing firm EMC recently, as a way of moving more forcefully into online services.

HP did consider spinning off its PC division in 2011 under then-CEO Leo Apotheker, but ultimately decided against the idea, and company executives have said in the past that personal computers underpin and support the company as a whole.

"I wonder what would have changed in the board's thinking that previously they thought they needed computers together with services to properly serve large enterprises to now," said Hudson Square Research analyst Daniel Ernst.

"PCs and printing remain in long-term secular decline, and while HP has managed that business well, the challenges for that portion of the split company will only grow as the demand continues to erode, and commoditization forces prices down further."

The Journal, citing one of its sources, said the plans call for current HP CEO Meg Whitman to become CEO of the new so-called enterprise company and also be chairman of the PC and printer company. Current HP lead independent director Patricia Russo would be chairman of the enterprise company.

The CEO of the PC and printer company would be Dion Weisler, who is currently an executive in that division, the report said.

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