Hewlett-Packard Plans to Break in Two
Split Would Separate PC, Printer Operation From Corporate Hardware and Other Units
Hewlett-Packard Co. HPQ +2.00% plans to break in two, separating its personal-computer and printer businesses from its corporate hardware and services operations, according to people familiar with the matter.
The company plans to announce the move as early as Monday, the people said. It is expected to be effected as a tax-free distribution of shares to the company’s stockholders next year, one of the people said.
The move is one H-P and its investors and analysts have long contemplated. It would come amid a wave of breakups and spinoffs at technology companies and in the wider corporate world, underpinned by the idea that companies with a narrower focus perform better. The moves in many cases have been well-received by shareholders—if not actively sought by them.
Last Tuesday, online-auction pioneer eBay Inc. EBAY -0.77% announced a plan to spin off its PayPal payments-processing unit. Shareholders rewarded eBay’s decision, pushing the company’s shares up about 7.5% that day.
This isn't the first time H-P has come close to a decision to hive off its sprawling PC operation. In 2011, when it announced the ill-fated acquisition of U.K. software company Autonomy Corp., H-P said it was exploring a separation of its PC business. Under pressure from shareholders that led to the departure of then-Chief Executive Léo Apotheker, H-P reversed course two months later and said it would hold on to the business.
In 2012, under current H-P CEO Meg Whitman, H-P reorganized itself to combine the PC business with its more profitable printer operation.
Ms. Whitman will be chairman of the PC and printer business and CEO of the separate, so-called enterprise company, one of the people said. Current lead independent director Patricia Russo will be chairman of the enterprise company, while Dion Weisler, an executive in the PC and printer operation, is to be CEO of that business, this person said.
In fiscal 2013, the printing and personal systems group, as it is known, inked $55.9 billion in revenue, about half the Palo Alto, Calif., company’s total. Sales for the operation dropped 7.1% amid fierce competition, compared with a 6.7% decline for the company as a whole.
Last year, H-P lost its place as the largest PC maker by shipments, slipping to No. 2 behind China’s Lenovo Group Ltd, according to industry research firm IDC.
H-P, famously founded in a garage in Palo Alto 75 years ago, has been undergoing a multiyear restructuring under Ms. Whitman as the company tries to stem sales declines. Aside from the PC and printer business, the rest of H-P’s revenue comes from selling services and hardware such as servers and data-storage systems to corporations, as well as software and financial services.
H-P’s shares have risen sharply since last year, but are still well below their highs in recent years—and the even loftier levels they reached in the 1990s tech boom. H-P shares increased 2% Friday to $35.20, giving it a market capitalization of nearly $66 billion.
To combat lower sales and provide lift to its shares, H-P has laid off tens of thousands of employees and cut other costs.
Ms. Whitman has sought to push H-P further into growth pockets such as cloud software, but the company has struggled to make headway in such areas.
H-P has also been contemplating big strategic changes lately. Over much of the past year, the company held talks to merge with data-storage giant EMC Corp., but those negotiations, which would have created an industry giant with a market value of roughly $130 billion, recently ended, The Wall Street Journal has reported.
