The once mighty titan of the personal computing business Hewlett Packard (NYSE: HPQ) said Monday that it will split itself into two companies, separating its PC and profitable printer business from its enterprise services division.
Both companies will retain some of the HP branding. The PC and printer business will be known as HP Inc. while the enterprise services arm of the company will have the name Hewlett-Packard Enterprise.
By announcing a plan to half the company into two, CEO Meg Whitman effectively follows the position of the company’s former controversial CEO Leo Apotheker who, during his reign, advocated for spinning off of the company’s enterprise half.
In a statement, Whitman said “flexibility they need to adapt quickly to market and customer dynamics”.
“We can now more aggressively go after the opportunities created by a rapidly changing market,” she added, further stating that this splitting of the companies “underscores our commitment to the turnaround plan.”
For the 2013 fiscal year, which ended in October, HP’s Printer and Personal Systems Group,which is home to the company’s printer and PC operations, brought in just under half of HP’s total revenue — $55.9 billion — and earnings of $4.9 billion. The company’s enterprise business, generated about $60 billion in revenue and $6 billion in net earnings.
The plan is expected to finalize in October 2015.
What can turn around the sinking ship?
Lenovo (HKG: 0992) took the crown as the world’s biggest PC maker by volume for one reason: it simply manufacturers better, more innovative, products. HP hasn’t had a compelling notebook for a long time, while Lenovo has stellar offerings such as the Yoga series.
For HP to right itself in its PC division it needs to make some serious investments in producing compelling products. In comparison to what Lenovo or Dell might be offering, HP’s lineup seems clunky and uninspiring. While the ultra-profitable printer division will buoy the ship for some time, the PC arm will remain a drag until it has its Yoga moment.
