Hewlett-Packard on Monday confirmed a weekend report in The Wall Street Journal, stating that it will split the company in two. The split will create a hardware and services operation and a separate business dedicated to personal computers and printers.
"Our work during the past three years has significantly strengthened our core businesses to the point where we can more aggressively go after the opportunities created by a rapidly changing market," HP president and CEO Meg Whitman said in a prepared statement. "The decision to separate into two market-leading companies underscores our commitment to the turnaround plan ... by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders."
The hardware and services business will be named Hewlett-Packard Enterprise and will focus on servers, storage, networking, converged systems, services and software. Meg Whitman will be president and CEO of this company. The PC and printer business will be named HP Inc. and will focus on HP's traditional businesses as well as forward-leaning technologies such as 3D printing and "new computing experiences." Ms. Whitman will serve as chairperson of HP Inc.'s board of directors, but the firm will be run by Dion Weisler. HP's current shareholders will own shares of both firms.
According to HP, the timing on this split makes sense: HP is entering the fourth year of a five-year turnaround plan and feels that two smaller companies will be able to move quickly in the new competitive landscape for mobile devices and cloud services. But this isn't the first time HP has considered such a spin-off. And HP's previous CEO, Leo Apotheker, was actually ousted from the company in 2011 when he vaguely admitted that he was considering the plan.
That blunder led to the appointment of Meg Whitman as CEO, and after evaluating the plan, she determined that HP's size and market power would be diminished if HP split up. "It's clear after our analysis that keeping [the PC business] within HP is right for customers and partners, right for shareholders, and right for employees," she said at the time. "Together we are stronger."
So what changed?
In the intervening three years, the move to mobile devices and cloud services has only accelerated, and HP's lumbering size was more of a liability than a strength. The firm has struggled with mobile, to say the least, and doesn't have a presence in smart phones or tablets. Likewise, HP is not a major player in cloud computing, and it's years behind other firms—like Microsoft—that are widely believed to have moved slowly into this new era as well.
The two new companies, HP Enterprise and HP Inc., will both have over $50 billion in annual revenues and will be place somewhere in the top half of the Fortune 500. It's not clear yet how many employees will be in each company. But HP had over 317,500 as of a year ago, and has since laid off 36,000 of a planned 55,000. Assuming half went to each company, HP Enterprise and HP Inc. would both have about 130,000 employees, roughly the same as Microsoft.