12 July 2020

Hewlett-Packard Split

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Hewlett-Packard Co. confirmed Monday that it planned to split the company into two parts, a move executives said was driven by the need to stay nimble to keep up with rapidly changing technology. H-P will consist of the company’s personal-computer and printer businesses. The other, Hewlett-Packard Enterprise, will sell computer servers, data-storage gear, software, consulting operations and other services for corporate-technology departments. Each of the companies will be about the same size, with more than $50 billion in annual revenue.

H-P Chief Executive Meg Whitman said Monday that the two companies will be on very different courses. The new HP Inc. will be milked for cash, which will be earmarked for returns to stockholders. The enterprise company, which Ms. Whitman will run, will be operated for growth through a faster pace of investment in new products and through acquisitions, executives said on a conference call with analysts.

Investors seemed pleased with the move, as shares of Hewlett-Packard jumped as much as 5.4% in morning trading Monday. The stock has risen sharply since the beginning of last year, but shares remain well below their highs in recent years—and the even loftier levels they reached during the 1990s tech boom.

Separately, H-P also boosted Monday the number of expected layoffs it has planned by 5,000 to 55,000, after identifying “incremental opportunities for reductions.” H-P had previously projected its job cuts to be between 45,000 and 50,000, and it already has shed 36,000 employees under the restructuring program as of the end of the most recent quarter.

Monday, Ms. Whitman said it was the right move then for H-P to stay together, in part because the company was too financially weak to go through with a breakup. But she said the company became healthier under her watch, and technology has shifted to favor companies that can move fast.

The Journal recently reported that for much of the past year, H-P held talks to merge with data-storage equipment maker EMC Corp., a deal which would have created an industry giant with a market value of roughly $130 billion. Although the talks recently ended, the separation could pave the way for H-P’s corporate hardware and services business to ultimately be combined with EMC, industry observers said.

H-P, which affirmed its guidance for the year ending Oct. 31, also said it expects per-share earnings of $3.83 to $4.03 for fiscal 2015. In the 2013 fiscal year ended last October, the Printing and Personal Systems Group, as it is known, reported $55.9 billion in revenue, about half of H-P’s total. Sales for the operation dropped 7.1% amid fierce competition, compared with a 6.7% decline for company revenue as a whole.

The recent wave of breakups and spinoffs at technology companies and in the wider corporate world has been fueled by the idea that companies with a narrower focus perform better. The moves in many cases have been well-received by shareholders—and sometimes actively sought by them.

Click here to access the full article on The Wall Street Journal. 

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