Hewlett-Packard Plans to Break in Two

Hewlett-Packard Plans to Break in Two
online.wsj.com

There was a reason for conglomerates in 1960-70s: shortage of capital meant that cross-subsidizing one division by another was the only viable way to finance growth. These days are long over.

Nowadays, it makes much more sense to operate unrelated businesses as completely independent companies, with different set of managers and investors.

> Hewlett-Packard Co. HPQ +2.00% plans to break in two, separating its personal-computer and printer businesses from its corporate hardware and services operations, according to people familiar with the matter.

> The company plans to announce the move as early as Monday, the people said. It is expected to be effected as a tax-free distribution of shares to the company’s stockholders next year, one of the people said.

> The move is one H-P and its investors and analysts have long contemplated. It would come amid a wave of breakups and spinoffs at technology companies and in the wider corporate world, underpinned by the idea that companies with a narrower focus perform better. The moves in many cases have been well-received by shareholders—if not actively sought by them.

> Ms. Whitman will be chairman of the PC and printer business and CEO of the separate, so-called enterprise company, one of the people said. Current lead independent director Patricia Russo will be chairman of the enterprise company, while Dion Weisler, an executive in the PC and printer operation, is to be CEO of that business, this person said.

> In fiscal 2013, the printing and personal systems group, as it is known, inked $55.9 billion in revenue, about half the Palo Alto, Calif., company’s total. Sales for the operation dropped 7.1% amid fierce competition, compared with a 6.7% decline for the company as a whole.

> Last year, H-P lost its place as the largest PC maker by shipments, slipping to No. 2 behind China’s Lenovo Group Ltd, according to industry research firm IDC.

Those advantages are a big reason to why they have better access to carriers - meaning much better marketing - and the reason behind their ability to push volumes, create brands, and manufacture so many variants to compete better than others.