Hewlett-Packard will be splitting into two companies in order to reshape its business, but is this new development an example of HP becoming nimbler or is it a way for the company to saw off its less profitable arm?
The Silicon Valley company, which has been struggling to find a niche in an increasingly mobile world, will split to focus one business on computers and printers and the other on "corporate hardware and services operations," according to Reuters. It also plans to "spin the unit off through a tax-free distribution of shares" to shareholders. The company is expected to make the announcement Monday.
This is a major restructuring of the company which made $112 billion this year and has more than 300,000 employees. It's market value is considered to be $66 billion.
Hewlett-Packard was founded in 1939 in a Palo Alto, Calif. garage and shaped the personal computer industry and Silicon Valley. Now, however, Chinese company Lenovo is the world's top PC maker and it faces a strong U.S. rival in Dell.
The spin-off has been considered for a while, according to unnamed sources, and HP was considering a merger with cloud-computing and storage company EMC.
The Wall Street Journal said that HP is planning on current chief executive Meg Whitman to become the new chief of its enterprise operations. The company also plans on Dion Weisler as the new chief of the PC and printer company, Reuters reported.
HP has tried to cash in on mobile tech, but a series of bad decisions made the company shy away from its WebOS phones and tablets. In 2011, it also "spun off"
its computer and printer business and sell off its phone and tablet business, but eventually regulated its WebOS to open source.
We know that HP isn't very sentimental about ripping out parts of its empire that aren't working. So, is this new development just an example of HP becoming smaller or nimbler or is it a way for the company to saw off its less profitable arm? We will find out soon, but we tend to think it's the latter.
Published at 10:19 AM PDT on Oct 6, 2014