Hewlett-Packard is officially splitting in two. Following rumors over the weekend, HP is announcing today that it will separate its PC and printer division from its enterprise and services business. The split means current CEO Meg Whitman will become the chairman of the PC and printer operation, and continue as CEO of the split-off enterprise business. Dion Weisler, an executive at HP’s PC business, will take over as CEO of the company’s PC and printer operation.
HP Enterprise is the newly split-off part of the original company, and HP Inc will continue to focus on PCs and printers. "The decision to separate into two market-leading companies underscores our commitment to the turnaround plan," says HP CEO Meg Whitman. "It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders." HP is planning to complete the split by the end of fiscal 2015, and the structure will mean the company's total planned layoffs will rise to 55,000 from an earlier estimate of 45,000 to 50,000 cuts.
A change in direction for a struggling PC maker
Today’s split is a significant change for the company, following rumors from 2011 that HP was considering a similar split at the time. Those reports surfaced shortly before HP appointed Meg Witman as CEO, just 11 months after former CEO Leo Apotheker took over from Mark Hurd after he was forced to resign amidst charges of inappropriate business conduct. Apotheker spearheaded a disastrous acquisition of Autonomy, and failed to capitalize on the company’s purchase of webOS.
Whitman’s era at HP has seen the company struggle to cement a solid position in the industry, leaving Lenovo to dominate PC sales worldwide. Whitman’s initial assessment of the company after around six months left her feeling it was "too complex and too slow," noting it had underinvested in its PC division. Instead of significant investment, Whitman claimed in 2012 that the company had to offer a smartphone, before failing to announce one in 2013. Board members reportedly mulled spinning off the company’s consumer PC business in 2013, but it never happened. HP has recently focused on Android tablets, and even an Android laptop, after describing Microsoft as an "outright competitor."
HP and Microsoft appear to be forming a closer relationship with the launch of new low-cost Stream PCs. Although Lenovo continues to push Windows-based PCs, Microsoft still needs close PC allies as it demonstrated with a $2 billion loan to help Dell go private last year. That particular deal may have angered HP, but the renewed partnership will see Microsoft and HP take on Chromebooks this holiday season. HP is also planning to sell a smartwatch this fall.
A new HP says it will focus on "new computing experiences" and technologies like 3D printing. "As the market leader in printing and personal systems, an independent HP Inc. will be extremely well positioned to deliver that innovation across our traditional markets as well as extend our leadership into new markets like 3-D printing and new computing experiences -- inventing technology that empowers people to create, interact and inspire like never before," says Dion Weisler, head of HP's Printing and Personal Systems business.