These past few months HP has been negotiating a very tricky feat: Splitting the company completely in two – and explaining it to the press and shareholders in a way that makes sense.
Of course, major company shifts are not uncommon: Spinoffs, mergers, and buyouts are all practical solutions when a company wants to renew focus on its core activities or cut out some costs that were weighing the corporation down. But a full split into two large but independent companies is a much rarer move…and is heavily influenced by HP’s interesting place in the industry.
HP and the Services Schism
While the average consumer knows HP best as a purveyor of printers and business-friendly laptops back in the early 2000s, the company today is a different animal. Interest in its consumer products has waned, while the company’s investment in B2B enterprise-oriented services has grown.
HP is not the only company to follow this trend. IBM and others have also been drawn into the services realm and the ever-growing sectors of cloud tech management, new data storage and management systems, more security options, better CRM and analytics…the list is a long one. There’s gold in the enterprise service hills, and ever since the late 2000s companies have been digging for it.
The problem this creates for companies like HP and leaders like Tim Stonesifer, the upcoming CFO of the company, is a bifurcated focus. You can only stretch for so long between providing consumer electronics and providing business services. HP is solving the problem by breaking itself neatly down the middle.
Big B2B Opportunities
You can take a look at HP’s major plans for the split if you are interested in the details. In summation, the two new companies will be called HP Enterprise and HP Inc. HP Enterprise will deal with servers, data storage, networking solutions, converged systems, and its OpenStack Helion cloud platform – the areas that HP would like to focus on. HP Inc. will be in charge of products like printers and laptops.
Leadership shifts are also included in the split. Meg Whitman will be president and CEO of HP Enterprise, with Pat Russo as chairman of the board. Dion Weisler will take the leadership role for HP Inc. with Meg Whitman as chairman of the board. Keep in mind that all this is take place in HP’s five-year “turnaround” plan and may represent the culmination of changes that the company has been making over the past several years, no doubt involving these leaders: They know exactly what they are getting into.
Financial Factors to the Splits
HP could have simply spun off the divisions it found less important – but there are a few compelling reasons for splitting in two instead. First, HP has tried to spin off its PC business before but came to the conclusion that HP products need the HP brand and logo to succeed, a canny estimate that this split acknowledges.
Additionally, both companies will be publicly traded and investors will receive shows for both companies – a solution that is guaranteed to make shareholders much happier, despite the negative reaction when HP first announced the news. Also keep in mind that there’s a non-compete clause for three years after the split, so both new HP companies will have a bit of extra breathing room to stretch out and find their own places.
Ultimately, the question that HP’s split brings up is “Does this mean that HP is giving up on its consumer electronics?” The answer is still nebulous, but it appears to be, “In its current form, yes.”
Despite the endurance of HP’s printer lines, the company’s focus hasn’t been consumer electronics for some time. Its work machines and laptops face steep competition from brands like Microsoft and Apple, which are becoming increasingly deft at navigating the professional product waters and coming out with strong new products (the Surface Book, the iPad Pro, etc.).
HP has been trying to keep up, but consumer compatibility is an issue: For example, visit HP’s website and see how long it takes you to actually find a product and put it in your shopping cart. Then visit Apple’s site and try the same experiment – compared to the Apple buying experience, HP’s consumer purchase process feels muddled, labyrinthine, and dated. It’s a telling sign of the times.
In response, HP appears to be backing away from mainstream electronics and focusing instead on “exciting new technologies like 3D printing and new computing experiences.” This hints at a smaller, investment-oriented company that is also focused on businesses with electronic solutions, a move that wisely indicates HP’s first successes in the industry. HP Inc. will also be focusing on more joint ventures with Partner First Services, designed to help bring other businesses and designers on board.