Originally Posted By Steven Burke on October 5, 2014 on CRN.com
Hewlett Packard is set to split into two companies: a $56 billion PC and Printing business and a $56 billion enterprise computing, software and services business, according to a Wall Street Journal report.
The split would be accounted for as a tax-free distribution of shares with HP CEO Meg Whitman having a hand in both companies: remaining as chairman of the PC and printer business with Printing and Personal Systems Executive Vice President Dion Weisler taking the CEO post, according to the Journal. Whitman would remain CEO of the Enterprise computing business with Patricia Russo, a lead independent director, becoming chairman of that business, the Journal reported. The announcement of the split into two companies could come as soon as Monday, the Journal reported.
HP solution providers said the split would dramatically alter the competitive landscape in both PCs and enterprise computing and services. They said the move would raise questions about whether partners will continue to benefit from HP’s $112 billion financial muscle and scale as they deliver desktop to data center solutions.
[highlight type=”one”]”This is a surprise,” said Bob Venero, the CEO of Future Tech Inc., a Holbrook, New York solution provider, No. 234 on the CRN SP500. “The question is going to be: does one plus one equal two or is one plus one just one. When we sold a client system and an enterprise system you had a bigger value to that deal which made it more profitable for partners. Now you are going to have two separate companies.”[/highlight]
[highlight type=”one”]The split into two companies raises complex questions for partners, investors and customers, said Venero. “I would think the stockholders are going to have to approve the split,” he said. “We are going to have to wait and see how they define the split. There are a lot of questions that need to be answered before we know for sure what this is going to mean. We won’t know the impact for partners, customers or stockholders until we get the nitty, gritty detail.”[/highlight]
The move to split the company into two separate units comes only two weeks after reports surfaced that HP had considered a spin-off of its $56 billion personal systems group business as part of a mega-merger discussions with EMC which broke off some time ago. An HP-EMC merger would have created a computing behemoth with $130 billion market capitalization.
Now it appears, HP is going down the path of splitting up to unleash new competitive fire in both its PC-printing business and its enterprise computing business. It would not be the first time that HP considered a PC spin off. Three years ago, HP considered spinning off its PC business under former CEO Leo Apotheker.
HP CEO Meg Whitman, who replaced Apotheker, however conducted an internal review that reaffirmed HP’s commitment to the personal systems business. “The HP board of directors is confident that PSG (Personal Systems Group) can drive profitable growth as part of the larger entity and accelerate solutions from other parts of HP’s business,” HP said in a statement three years ago.
At the time, HP looked at the linkages between the personal systems group and the rest of the HP businesses. That analysis included “revenue and cost synergies, one-time separation and startup cost, and potential execution risks” along with how to continue providing “customers and partners with the best products, services and experiences.”
Three years ago, Whitman said the decision to keep the personal systems business with HP was “very straightforward.
“A separation would not create incremental shareholder return or customer value,” Whitman said at the time. “PSG is core to HP’s portfolio, and it makes strategic, financial, and operational sense for HP to retain it. Specifically, PSG benefits from HP’s global reach, scale, and innovation. It contributes significantly to HP’s supply chain efficiencies, component pricing, distribution channels, and solutions portfolio.”