HP To Split Into Two Separate Companies, Slash 5,000 Jobs
Meg Whitman, HP's chairman, CEO, and president is leading a new charge, splitting the tech giant down the middle to create two new publicly traded Fortune 500 companies, and cutting 5,000 jobs. The news comes in the third year of Whitman’s five-year turnaround plan and the split is expected to become a reality by the end of fiscal 2015.
Here’s how the company will split: Hewlett-Packard Enterprise will include HP’s enterprise technology infrastructure, software and services businesses. HP Inc. will cover the firm’s personal systems and printing businesses and retain the current logo. HP also plans to slash 5,000 more jobs as part of its previously announced restructuring plan, bringing the total number of layoffs under Whitman to 55,000, according to the company's presentation to investors. As of the third quarter of 2014, approximately 36,000 employees have left the company as part of the restructuring.
Whitman prefaced an explanation of the board’s decision about the company’s future by pointing to the past. As she sees it, HP’s work over the last three years has strengthened its core business to the point where it can more aggressively pursue opportunities in a rapidly changing market.
“The decision to separate into two market-leading companies underscores our commitment to the turnaround plan,” Whitman said. “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’s ‘House Cleaning’
By transitioning from one HP to two new companies, Whitman is confident the brand will be in an even better position to compete, support its customers and partners, and maximize shareholder value. From a practical business perspective, separating HP into two independent publicly traded companies will give each a more focused equity currency.
Whitman will hold the positions of president and CEO of Hewlett-Packard Enterprise, and Cathie Lesjak, chief financial officer of HP, will hold the same position with Hewlett-Packard Enterprise. Whitman will also serve on the board of directors of Hewlett-Packard Enterprise. Pat Russo will move from lead independent director of HP to chairman of Hewlett-Packard Enterprise.
On the other side of fence, Dion Weisler, executive vice president of HP’s Printing and Personal Systems business, will lead HP Inc. as president and CEO. Whitman will serve as non-executive chairman of HP Inc.’s board of directors.
On the HP Inc. side, Weisler is convinced the industry is facing a defining moment as customers look for innovation to empower workforces that are more mobile, connected and productive while at the same time allowing a seamless experience across work and play. According to Weisler, an independent HP Inc. “will be extremely well positioned to deliver that innovation across our traditional markets” and move deeper into new markets. He specifically mentioned 3-D printing and new computing experiences.
Building on Strengths
Zeus Kerravala, a principal analyst at ZK Research, told us Whitman’s direction makes a lot of sense for HP. He called the split a bold move, but considering the company has struggled for years, bold may be what HP needs.
“HP Printers has always been a very profitable part of the company. HP printers are really the de facto standard when it comes to both business and consumer printing,” Kerravala said. “In many ways, the split allows that business to move forward as a successful company on its own and allows the other half of the business to refocus on areas in which it thinks it can win.”
Kerravala pointed out that, for many reasons, there wasn’t much synergy between the two halves of the company.
“If nothing else I think it makes sense to split them up for the financial stability of the printing side,” he said. “The other group can shed off the things it doesn’t want and streamline to become a leaner company.”
Posted: 2014-10-13 @ 3:39pm PT
@ Gerald: Sorry, we don't have any information about how the split would impact medical insurance. Best bet would be to check with whoever handles your benefits administration.
R. Gerald Clark:
Posted: 2014-10-13 @ 3:25pm PT
I think that it is going to be a good move. Being a retired digital equipment co. employee, I am concerned about my medical insurance. Can you give me any idea what is going to happen to this. Thanks