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Business Management

Confused? A Bluffer's Guide to the HP Schism

You could be forgiven for not being able to follow the HP saga in recent years as the plot has been as complex as a John Le Carré novel. Here’s your chance to look smart and well informed.

What’s happening?
HP is splitting itself into two. HP Inc. will cover printers and personal computers and devices. Hewlett-Packard Enterprise will handle servers, storage, networking and services plus smaller elements such as cloud and software. The emerging companies will be about the same size – each $57-58bn in revenues and 9-10% in profitably.

As of when?
It’s going to take a while to “disentangle” the wings despite the fact that they have been operating as business units in this way for a while, presumably with this separation as a potential development. The company says the cord should be cut at the end of fiscal 2015 – that’s October next year.

Why’s all this happening?
On an analyst call, current HP CEO Meg Whitman said she wants the company or companies to have more “nimbleness”. This is the vogue-ish way of saying that they need to be fleet of foot to capitalise on new opportunities that are flashing by.

What opportunities?
Well, 3D printing, for example, for HP Inc.: HP is the biggest company in printing and it wants to wade in fast to what should be a huge new opportunity. For Hewlett-Packard Enterprise Whitman makes reference to the ‘New Style of IT’ – cloud, Big Data, security, mobile etc. – and how the new company can help companies deploy these.

The names are old school. How come?
Whitman said that when, a few years, ago a spinout for the personal computing unit was considered, $1bn was factored in to build a new brand. That’s no longer needed, so there’s a fat saving right away. HP Inc. keeps the logo by the way so the media creative and branding agencies stand a chance to make some money designing the Hewlett-Packard Enterprise livery.

So they’d thought about doing something like this before?
Yes, under former CEO Léo Apotheker, for example.

So why didn’t they do it then?
Whitman said at the time that this would have added a lot of cost (see above re. PCs). Now she says the time is right as she and her team have steadied the ship.

You buying that?
Pass. For now.

Is she staying?
Doubly so. She will chair HP inc. and be CEO of Hewlett-Packard Enterprise.

Have they given up on M&A now?
No way. Whitman made lots of references to this and said the companies would have their own strategies, but she sees opportunities to deal. To relax shareholders though she made many and repeated references to “targeted M&A” and a dedication to a “returns-based” approach and focus on “shareholder value creation”.

 

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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