Hewlett-Packard Co. is splitting into two companies, using a breakup to become nimbler after failing to keep up with the shift away from the printing and personal-computing businesses it pioneered.
Chief Executive Officer Meg Whitman will lead Hewlett-Packard Enterprise, a new company focusing on corporate hardware and services, while Dion Weisler, the vice president in charge of personal-computer and printer operations, will become CEO of that business, called HP Inc., Hewlett-Packard said in a statement today.
Whitman is reversing an earlier position that the company should remain a single enterprise. When she took the helm in September 2011, as the fourth CEO in 2 1/2 years, she ended plans by her predecessor to spin off the PC unit. Hewlett- Packard, which had set the pace in computers for decades, had embarked on a rapid expansion plan through acquisitions—some of them controversial—followed by tumultuous years of strategy shifts, cost-cutting and reduced profit targets. Now Whitman is pursuing the kind of spinoff plan that’s gathering steam at other technology companies.
“It puts them in a better position than they would have been yesterday or even a couple years before, but it’s still a very competitive marketplace,” said Peter Wahlstrom, an analyst at Morningstar Inc., who has a hold rating on the stock. “Enterprise is really where a lot of the growth is, and then you’ve got the PC-printing business which is a little bit more an annuity, a stable steady-eddie.”
Whitman said the board’s annual review of the company’s turnaround showed that its balance sheet and leadership were now strong enough to support the split. The breakup will let the two companies focus on the rapid changes in their respective markets, she said.
“Nimbleness and speed are going to be an important part of the future,” Whitman said in an interview. “By separating into two companies with quite distinct markets, with quite distinct customers, we’ll be able to move faster to take advantage of the changing customer needs and accelerating our product and innovation road map.”
Hewlett-Packard shares rose 4.6 percent to $36.81 at 11:32 a.m. in New York. They had gained 26 percent this year through Oct. 3, after almost doubling in 2013.
Other technology companies have undertaken similar transformations as they seek to keep up with a shifting market. Last week, EBay Inc. announced that it would spin off its PayPal unit. EMC Corp., a maker of storage computers, is exploring strategic options that could include a full or partial sale, or a spinoff of VMware Inc., and has also held merger talks with Hewlett-Packard, people familiar with the matter have said.
International Business Machines Corp. has been shedding its hardware operations, including selling its PC unit to Lenovo Group Ltd. in 2005 and its low-end server unit to the Chinese company this year.
Hewlett-Packard’s breakup will be a tax-free distribution of shares to shareholders. Whitman will also become chairman of the PC and printer company, while current lead independent director Patricia Russo will be chairman of the enterprise unit, Hewlett-Packard said.
Planned job cuts will increase to 55,000 and costs to restructure will be about $600 million. That’s compared with as many as 50,000 previously projected, Palo Alto, California-based Hewlett-Packard said in a presentation today.