HP Says It May Sell Off Underperforming Businesses

HP officials said in an SEC filing that business units that aren't meeting goals could be sold, though they did not specify any particular businesses.

Hewlett-Packard executives, who in the past have trumpeted the benefits of keeping the tech giant's myriad businesses together, are now considering getting rid of business units that underperform.

Based on the company's 10-K filing with the Securities and Exchange Commission Dec. 27, Bloomberg reported that HP CEO Meg Whitman said the company is continuing "to evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives."

Those assets and businesses could be sold, HP officials said in the SEC document, but they also warned that selling businesses would not be easy.

"When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives," they said in the 10-K filing. "We may also dispose of a business at a price or on terms that are less desirable than we had anticipated."

HP officials in the document did not specify which businesses could be shed, but with the company's financial difficulties over the past couple of years, there is no lack of possible targets. During his 11-month tenure as CEO in 2011, Leo Apotheker proposed selling off or spinning off HP's PC unit, and said that instead the company should focus more on its software and services efforts. HP's stock price took a hit, and soon after taking over for Apotheker, Whitman said the company would keep the PC business—eventually merging it with HP's printer business—saying HP's broad product portfolio was one of the company's strengths.

It was a message she reiterated to Wall Street analysts and journalists in October 2012, when laying out her multi-year plan to get the company back on stronger financial footing. "Scale is a plus," Whitman said.

Not everyone agreed. In August 2012, Steven Milunovich, an analyst at UBS Investment Research, wrote in a report that HP should get rid of the PC and printer businesses. He questioned in the report "whether HP is 'better together' and that it might be 'smart to be apart,'" specifically spinning off printers and PCs. "HP lacks the pure enterprise focus of IBM and EMC, yet will have trouble competing for consumers without strong tablet and phone businesses like Apple and Samsung. HP is surrounded."

The decline in worldwide PC sales over the past couple of years has battered HP and other tech vendors closely tied to the PC market, with the global economy continuing to struggle and consumers turning more of their attention to tablets and smartphones. HP has been working to become a larger enterprise IT solutions provider and expand its cloud computing offerings while trying to keep its PC business moving forward.

Another target could be HP's Autonomy software business, which has become another problem for HP officials to deal with. HP bought Autonomy last year for almost $11 billion, a deal that started under CEO Mark Hurd, who left in 2010, and culminated during Apotheker's tenure. HP officials in November announced the company was taking an $8.8 billion charge over the deal, more than half of which was related to "serious accounting improprieties" at Autonomy before the deal's completion, they said.

In the SEC filing Dec. 27, HP officials said the U.S. Department of Justice has opened an investigation into Autonomy. Autonomy's founder and former CEO, Mike Lynch, has denied any wrongdoing by Autonomy officials leading up to the sale to HP, and Apotheker has argued that other HP officials—such as Whitman, who was on the HP board of directors at the time the deal was completed, and board Chairman Ray Lane—deserve as much blame for the Autonomy acquisition as he does.

HP has seen its stock price fall almost 70 percent since Hurd left HP. Under Whitman, the company has been trying to restructure itself—including plans to cut 29,000 jobs—and she has said a turnaround could take years. However, throughout the 10-K filing with the SEC, HP officials warned that any number of factors—from problems in the global economy to fierce competition within the multiple technology segments that HP plays—could impact the company's plans going forward.