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I thought seriously about writing this article on Sunday, but, although the “news” was coming from usually reliable sources, it was, nonetheless, still speculation. By the time that I sat down at my computer this morning, however, what was speculation yesterday had become reality. Hewlett-Packard (NYSE:HPQ) officially announced this morning that plans to divide itself into two distinct and individually listed companies before the end of its FY2015.
H-P Chairman, President and CEO, Meg Whitman explained that the decision to divide the company by core competencies is part of, and “underscores” the board’s continued commitment to its five-year turnaround plan. The company is 60% of the way to full implementation of the plan that should be completed by the end of FY2016.
“Our work during the past three years has significantly strengthened our core businesses to the point where we can more aggressively go after the opportunities created by a rapidly changing market,” she said. “The company is now positioned to accelerate performance, drive sustained growth and demonstrate clear industry leadership in key areas. The decision…will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders.”
The Hewlett-Packard Company will become Hewlett-Packard, Inc. and Hewlett-Packard Enterprises. Whitman will continue as President and CEO of the latter and Chairman of the Board for H-P, Inc. Current Executive VP of H-P’s printing division, Dion Weisler will assume the position of President and CEO of H-P Inc.
- Hewlett-Packard, Inc. will focus on production of personal computers, printers and other emerging technology “experiences,” such as, 3D printing.
- Hewlett-Packard Enterprises will focus on enhancing its footprint in “servers, storage, networking, converged systems, services and software as well as its OpenStack Helion cloud platform.”
The current $112 billion H-P revenue should divide almost evenly between the two new companies. With revenues in excess of $50 billion each, each of the new companies would remain in the top half of the Fortune 500. On the other side of the coin, H-P has raised the number of expected layoffs for the division and the restructuring plan at large by 10% from 50,000 to 55,000. About 36,000 have already been disengaged.
The transaction will result in a tax-free distribution of shares, with current shareholders having shares in both newly-formed companies.
Dion Weisler noted that, “This is a defining moment in our industry as customers are looking for innovation to enable workforces that are more mobile, connected and productive while at the same time allowing a seamless experience across work and play.”
The NYSE has opened for the day during the writing of this article with HPQ share up 4.14% from Friday’s close of 35.20.
