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Business Management

HP Split Risks Injury to Several Parts

In the 1930s Bill Hewlett and his Stanford classmate Dave Packard co-founded a company that was to change America and hence the world. The pioneering ‘garage startup’, Hewlett-Packard was just that – a company building oscillators, resistors and other parts in Packard’s garage. HP went on to be a true computing innovator, Silicon Valley’s North Star and a company renowned for its engineering excellence, ethical behaviour and dedication to research and development.

Today, HP is a company that retains a grand marque but its lustre has been scuffed by years of management snafus, muddled strategies, layoffs, minor scandals, change programmes and revolving door to the CEO office. Its latest move, expected later today, will be to split itself into two parts: one unit focusing on personal computing and printers, the other on corporate hardware and services.

Already, HP won’t want for third-party counsel or feedback. Those of us who have followed the company over decades will point out that hiving off the ‘personal’ division has been mooted before, most recently by Leo Apotheker, the CEO whose speech to that effect may have had a large part in his subsequent departure. Those with longer memories might also recall that Walter Hewlett, son of Bill, also called for renewed focus on printing and a focus on higher-margin areas rather than PCs.

Turning even further back, some will note that HP had success with the spinoff of Agilent, the test/measurement business with roots going all the way back under that famous Packard garage.

But spinoffs, like mergers and demergers carry risks and there are plenty of questions to ask about this exercise. Two in particular stand out: see if you can spot a similarity.

PCs and printers: a marriage made in hell?

HP is the 800-pound gorilla of printing and its consumables business would make a large enterprise on its own, but tying that to PCs might not make so much sense. Even IBM, the company that invented the sector, has exited the business such are the Pythonesque ‘waffer-thin’ margins to be made and the challenge to the model made by tablets and phablets.

Services and enterprise hardware: a marriage made in hell?

HP bought EDS to add to its own services businesses, and those inherited with acquisitions like DEC and Compaq, but the high-end traditional consulting business is heading nowhere but south in the cloud era where integration is faster and simpler. HP’s server, storage and networking business has been solid but looks increasingly frail – again because moves to the cloud mean that commodity servers and a different grade of networking fabric are required. And also, if PCs and printers were supposed to make for a foot in the door for HP sales execs, as was often supposed, then why split off?

One last question: will the blue-chip enterprises that are HP’s traditional customers be as happy to deal with companies that as individuals are much smaller in a world where buying from same-size peers is still a strong motivation?

We’ll revisit this when HP announces more details.

 

Martin Veitch is Editorial Director at IDG Connect

 

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Martin Veitch

Martin Veitch is Contributing Editor for IDG Connect

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