HP Reportedly to Split Into 2 Companies

The decision to create separate PC and enterprise businesses could be announced Oct. 6, the Wall Street Journal and Re/Code say.

HP Meg Whitman

Hewlett-Packard executives are considering splitting the tech giant in two, with one company focusing on the PC and printer businesses and the other on corporate offerings including services, networking services.

The Wall Street Journal, citing people familiar with the plan, reported Oct. 5 that company officials could announce their intentions as early as Oct. 6. According to the report, CEO Meg Whitman would be chairman of the PC and printer business—which would be known as HP Inc.—and CEO of the corporate-focused business, which would be called Hewlett-Packard Enterprise.

Dion Weisler, who is executive vice president of HP's Printers and Personal Systems unit, would be CEO of that business, while Director Patricia Russo would be chairman of the enterprise business, according to the Wall Street Journal.

The move would come two years into what Whitman in 2012 called a five-year restructuring of the company. By the time the restructuring was announced, HP had seen several consecutive quarters of poor financial results and had undergone a tumultuous year that saw the departure of two CEOs.

Her predecessor, Leo Apotheker, had proposed HP shedding the PC business and focusing instead on enterprise software and solutions, a move that was met by wide-ranging debate among industry observers and customers. That proposal and the troubled $10 billion acquisition for enterprise software maker Autonomy eventually lead to the end of Apotheker's tenure after 11 months.

Whitman's plan not only called for reducing expenses—including cutting 34,000 jobs—but also keeping the PC business in the fold, with the CEO saying that HP benefited from having a broad product portfolio and that PCs often helped the company get a foot in the door with customers. HP officials later folded the PC and printer groups into the same business unit.

However, HP last year lost its place as the world's top PC vendor to Lenovo and while the company has pushed to extend its reach into such new areas as tablets, it also has worked to transform itself into an enterprise IT solutions and services vendor, expanding its server portfolio through such products as its ultra-efficient Moonshot servers and growing its footprint in such areas as networking, storage and the cloud.

However, according to the Wall Street Journal, HP has struggled in its efforts in such areas as cloud software and declining sales in the PC and Printer Group—which accounts for about half of HP's overall revenues—in 2013 led to a 6.7 percent drop in HP revenues as a whole.

The move would come after recent reports that officials with HP and storage giant EMC had broken off year-long, on-again-off-again talks about merging the two companies.

EMC has been under pressure in recent months from activist investor Elliott Management—which owns about 2 percent of the company—to improve its financial picture by selling off the 80 percent of VMware that it owns. EMC CEO Joe Tucci told analysts and journalists in July that he would be reluctant to spin off what he called one of EMC's "most strategic assets."

However, the ideas of splitting HP in two and of EMC shedding VMware is part of a larger trend in the tech industry toward creating smaller, more focused companies. The most recent example of this was eBay's decision announced on Sept. 30 to spin off its PayPal online payments business.

Juniper Networks—another company in the crosshairs of Elliott Management—on Oct. 2 closed a $250 million deal to sell its Junos Pulse mobile security business to private equity firm Siris Capital, which will run the business as an independent company called Pulse Secure.

According to news site Re/Code, the decision to split HP in two comes after several months of unsuccessful efforts by the company to sell off some of its businesses, including its PC unit and some of its enterprise groups. The report, citing unidentified sources, said HP was unsuccessful in its efforts to sell its PC business to both Lenovo and Dell, and that IBM had rejected HP's approach to sell Big Blue its Business Critical Systems business, which includes its Integrity systems based on Intel's Itanium processors.

The Oct. 5 Re/Code report also said that Wipro and Infosys—both companies based in India—had turned down HP's offer to sell them its Enterprise Services group.