New post (HPs split: How we got here and what we can expect) has been published on headgab/hg/gab/8436/ Why and how?Hewlett-Packard, in an attempt to improve its fortunes through tax-free distribution of shares to stockholders, has split into two companies. The company’s personal-computer business and its corporate hardware and services operations will now operate independently. Meg Whitman will be CEO of HP Enterprise, while Dion Weisler, currently the Executive Vice President of HP’s Printing and Personal Systems Business, will lead HP Inc. The split is expected to be complete by the end of October 2015. That, of course, leaves room for the possibility that HP may just sell off parts of its business, according to some rumors.Why?This isn’t a novel idea – a number of big companies in tech have chosen to break up lately. Think: eBay and Paypal split just a few weeks back, prompted by Apple’s move into the mobile payment game, albeit a bit less amicably than HP’s consciously uncoupling. Why the choice to split? The companies will tell you that its because operations with different growth profiles and rates of growth are best managed as separate entities. This can be applied to HP, which has suffered sharp sales declines and sees better potential for its corporate hardware and services business than for its printer and PC side.In the aftermath of the split, analysts, stakeholders, and tech enthusiasts alike are all wondering if this segmented version of HP will drive a more profitable, stronger company? Will consumers choose to remain engaged with the HP brand in its new form? Only time will tell.From the outstart, this seems to be a thoughtful move, likely driven by the state of the PC market, given the mobile boom. The split could be useful in driving innovation, such as the 3D printing and new computing experience the company touted in its statement as key elements of HP Inc. moving forward.What can they accomplish?The goal, according to Whitman, is to use the split as a way to catapult to organization into two separate, nimble entities that will become true contenders in fiercely competitive markets. 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, she said at the time of the split.While HP’s tablet offerings still seem far behind the pack, especially given the latest announcement from Apple last month, the company will likely be focused on mobile products, like an HP Smartwatch, which should be coming soon.How two HPs can improveHP’s focusAs a result of the split, HP will now be able to do something it wasn’t able to before: focus. With these dissimilar business units united, there will likely always be internal conflict within the organization for the company’s attention and resources. This will distract from actual solutions being identified to ensure both sides of the business thrive equally. HP is a complex enterprise that was bound to get messy, the organizational clumsiness driven by chasing both business-to-business and business-to-consumer markets at the same time, both of which have very different customer needs and sales cycles. For example, this wouldn’t be the first time that a tech heavyweight has adapted to the shifting trends in the PC market and attempted to focus itself. For example: IBM sold its PC arm to Lenovo in 2004. Similar to HP’s spinoff, one of the IBM businesses was thriving more than the other – the hardware and enterprise-level service businesses was (and still is) a good one, but the PC businesses was dragging. Without the distraction of the PC arm, IBM was better off and Lenovo became the top-selling PC name in 2012, displacing even HP.HP stakeholders can rest easy as both IBM and Lenovo thrived after the split, particularly because such different businesses need dedicated leadership, attention and resources in order to truly succeed.In terms of the financial circumstances that led HP leadership to the decision to split, the company’s most recent financial statement suggests that its $42.6 billion PC and printer business saw a 3.1% sales increase from September 2013 – July 2014, although still falling behind Lenovo in the PC industry, according to IDC. Despite these healthy numbers, HP’s enterprise hardware and services unit plunged, generating $31.4 billion in revenue, 19% below its revenues for September 2012 – July 2013. At this rate, HP was quickly losing its position as a leader in the industry, particularly when trying to sell to businesses, as opposed to consumers. Luckily, it seems as though there is still profit potential in the printer business, which HP actually pioneered in the 1980s.In all likelihood, HP is responding to shareholder demands for more aggressive growth, driving the separation. Ultimately, the slower-growth business will be detached from the other in order to rapidly achieve growth. This has been a successful tactic for media companies like News Corp., Gannett and Time Warner Inc., which are breaking off their print businesses in order to accelerate the growth of broadcast operations. This is helpful for the media companies, as well as Hewlett-Packard, to resolve any cultural and organizational conflicts that may exist between the firm’s current and future businesses.In a way, this decision serves as vindication for former HP CEO, Leo Apotheker. Apotheker knew then what investors couldn’t or wouldn’t accept: HP was just too big and static to compete in the market landscape. During his time as CEO, Apotheker planted the seed for such a split, wanting to sell off the company’s personal computer business and focus on selling software and services to business customers.The investors on Wall Street put the kibosh on the plan and not soon after, Apotheker was fired. Despite this, he did have a point – he wanted to cut HP’s PC business loose (even though it’s been making money all this time) because PCs are a business of increasingly miniscule returns for HP. Why? Because, despite its attempts to keep up and glitz up its product, HP has failed to be a leader in the industry. Instead of trying to innovate and lead the way on technology, HP has always tried to win on the merit of well-worn corporate connections and price. Unfortunately, this hasn’t delivered the results the company was hoping for, leading CEO Meg Whitman to finish what Leo Apotheker started.
Posted on: Wed, 15 Oct 2014 11:21:15 +0000
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