HP Gives More Clarity About Post-Split Companies

After the vendor breaks in two Nov. 1, Hewlett-Packard Enterprise and HP Inc. will not compete against each other for three years.

HP Enterprise

Hewlett-Packard executives are providing more details regarding how the two new companies will operate when the tech giant officially splits in two Nov. 1.

HP earlier this month filed a Form 10 with the Securities and Exchange Commission (SEC) that gave greater depth to what Hewlett-Packard Enterprise will look like after the breakup, including what the company will sell, who will be on its executive team, what the potential risks and rewards are for the new company and how its relationship with HP Inc. will work.

The 316-page Form 10, filed July 1, is a necessary step toward registering Hewlett-Packard Enterprise as a new company. In the way the split will happen, Hewlett-Packard Enterprise essentially will spin out of what is now HP Co. HP Co. will then become HP Inc.

Hewlett-Packard Enterprise will sell a broad array of corporate technology, from servers and networking gear to storage hardware, enterprise software, cloud computing technology and services. During its last fiscal year, that part of the HP business had a net income of $1.6 billion after generating $55 billion in sales. During the previous year, the enterprise business netted $2.1 billion in profits and revenue of $57.4 billion.

The company will have a $1 trillion total addressable market (TAM), HP officials said.

Meanwhile, HP Inc. will sell PCs, printers and associated technologies.

During the first few years of Meg Whitman's tenure as HP CEO, she had pushed back at suggestions by industry and financial analysts and others that HP should spin out its PC business and focus more on the enterprise business. Her predecessor, Leo Apotheker, also had suggested HP shed its PC unit, though he was ousted from the job before he was able to implement the plan.

Whitman argued that HP was stronger as a single company, and that having the PC business in-house gave HP a strong avenue into customers' environments, significant scale and a strong position with its supply chain. However, several years into a restructuring plan that saw HP cut as many as 50,000 jobs, Whitman—who will be Hewlett-Packard Enterprise's CEO after the split—announced in October 2014 that HP would break into two publically traded companies.

That will happen at the end of HP's current fiscal year.

According to the SEC document, Hewlett-Packard Enterprise will have five business units covering enterprise technology, software, services, financial services and corporate investments. The company will focus on helping customers in several areas, including migrating to a hybrid infrastructure of both cloud-based and traditional technologies, security, big data and analytics, and enabling a mobile environment.

Regarding their post-split relationship, Hewlett-Packard Enterprise and HP Inc. will have agreements regarding the distribution of intellectual property and will enter into cross-licensing agreements to ensure that each will be able to continue using the IP they need. The two companies also will not directly compete with each other for the first three years.

"These non-compete provisions are intended to enable each company to more effectively pursue its businesses and succeed in its markets," the officials wrote in the SEC form.

The two companies also will not go after each other's employees. Neither will be able to pitch jobs to any of the other's employees for 12 months, or to hire employees from the other company for six months. However, there are exceptions. For example, if one company terminates an employee, the other company can hire that employee.

Whitman and other executives won't take a financial hit when they break up. According to the document, the CEO received $19.6 million last year, with most of that coming from stock. Whitman last year did see her salary jump from $1 a year to $1.5 million, and she also received a cash bonus of $4.3 million.

In addition, she won't head Hewlett-Packard Enterprise's board of directors. That job will go to former Alcatel-Lucent CEO Patricia Russo.