HP CEO Whitman: Turnaround Efforts Made Split Possible

By Jeffrey Burt  |  Posted 2014-10-06 Print this article Print

HP also faces growing competition in such areas as servers, where Lenovo officials hope to see the same results with their acquisition of IBM's server unit as they did in 2005, when they bought IBM's PC business, a move that helped propel Lenovo past HP to become the world's largest PC vendor.

Moor Insights and Strategy's Moorhead also noted that HP's PC group faces its own obstacles, from challenging Apple in the high end of the market to addressing oncoming demands like the Internet of things and wearable devices.

This is not the first time HP executives have considered getting out of the PC business. Whitman's predecessor, Leo Apotheker, announced plans in 2011 to spin off the PC business, a move that helped end his tenure after 11 months.

However, Whitman—who was on the HP board during Apotheker's time as CEO—said there are stark differences between his plan and the current one. Apotheker's proposal called for shedding the PC business but keeping printers and that it would have resulted as much as $1 billion in incremental costs to build up the new brand, she said. HP will keep the HP name and blue logo.

"We've actually solved the brand issue," Whitman said.

There will be significant challenges going forward, Moorhead said. Competitors will use the transition over the next year as an opportunity to court HP customers—similar to what HP did after IBM and Lenovo announced their server deal in January—and its employees. At the same time, a joint supply agreement between HP Inc. and Hewlett-Packard Enterprise will enable the new companies to negotiate with suppliers from a position of strength, at least temporarily.

Whitman said the decision to split the company makes sense now, even if it didn't just several months ago.

"Today is only possible because the turnaround has succeeded," Whitman said during the CNBC interview. "We had a lot of work to do to get HP into fighting shape. There was a tremendous amount of repair work and gathering ourselves to be able to compete in this new world order. Now the time is right as we think about what is the next phase of this turnaround."



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