Hewlett-Packard Company (HPQ) Divides Its Businesses Into Two Companies To Increase Its Competitive Margin

Hewlett Packard Company (HPQ)

Hewlett-Packard Company (NYSE:HPQ) is likely to divide into two parts to refocus over the profitable corporate service market and separate its computer and printer business from the corporate offerings. The partition of the company would yield two different segments including personal computer and printer business as the first one and corporate hardware and services operations to be second one.

The company is likely to announce the partition news today in the form of a tax-free distribution to the shareholders in the following year. HP has struggled to come up to standards of the current mobile and online computing demands. It is certainly a historic step in the reshaping of the technology industry with one of its major contributors, Hewlett-Packard Company (NYSE:HPQ), with over 300,000 employees undergoing a partition. The company is likely to announce revenues of up to $112 billion in the current fiscal year.

Hewlett Packard Company (HPQ)

As per the last quarterly results, personal computing and printing segment amounts for nearly 50% of the company’s revenue. Meg Whitman, CEO of HP, overruled partition proposal from her predecessor earlier, Leo Apotheker, who suggested spinning off the PC unit of the company. However, the circumstances are quite critical at present with Hewlett-Packard Company (NYSE:HPQ) struggling against companies such Apple Inc (NASDAQ:AAPL) with $596 billion market capitalization and Microsoft Corporation (NASDAQ:MSFT) with market cap of $380 billion.

Whitman would serve as the CEO of the enterprise business and chairman of the printer and PC segment. Dion Weisler would become the CEO of the PC and printer operation. Hewlett-Packard is facing tough competition in personal computer business where it lost its number one spot to the Chinese company, Lenovo. Whitman has introduced a string of new products along with job cuts to turn around the fortunes of the Silicon Valley Company.

Erik Gordon, University of Michigan, said that the split would have little to no effect over the shareholder value. He further added, “It is a little troubling to see Whitman split her time between a full-time job as CEO of the enterprise business and time-consuming duties as chairwoman of the legacy business that will require a lot of attention at the strategic level.”

As of now, both segments of the company stand equal in terms of revenue, as its printing and personal computer group reported revenue of $55.9 billion in its latest fiscal whereas technology solution group amounted for $55.6 billion in revenues. The PC and printer segment lead to an operating profit of $4.84 billion whereas corporate services sector reported $5.85 billion in profits.

This article has been written by Prakash Pandey and edited by Serkan Unal.

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