Can HP Spin-Off Change Meg Whitman's Fortune?
After struggling to adapt to the new era of mobile and web computing in the recent months, PC major Hewlett-Packard or HP is reportedly splitting itself into two companies. A WSJ report that first published the news citing one of its sources, said the plan calls for current HP CEO Meg Whitman to become CEO of the new so-called enterprise company and also be chairman of the PC and printer company. Industry enthusiasts are keen on how Whitman’s recent move can change the fortune of the company.
While some believe that Whitman adopted a plan to split HP’s PC and printer divisions off from its enterprise hardware and service groups ever since she took helm in 2011, she had officially rejected to such a rumor until recently, focusing on the restructuring part. She told Bloomberg News in 2011, “If you try to hive a division off, it’s really hard because you almost have to recreate the whole thing.”
However now she had decided, the journal states that the current HP lead independent director Patricia Russo would be chairman of the enterprise company. The CEO of the PC and printer company would be Dion Weisler, who is currently an executive in that division, it said.
The split-up of HP again proved that Whitman, who was always known as a person of high ambition earlier pursued a career in politics, a contestant at becoming California’s governor. Before that, she ran online firm eBay for a decade, following stints at Hasbro and Walt Disney among others. As Erik Gordon, a professor at the University of Michigan wrote in his blog: “She may have to shift gears now, from having been a very prudent, careful CEO, to being a CEO who’s getting the ball moving…”
There have already been a lot of changes in the past 2-3 years. The US-based computing major, is in the midst of a restructuring plan and has announced thousands of job cuts in recent years. In August, HP reported a sharp fall in profit despite a rise in revenue, helped by improved PC sales. Whitman also acknowledged that demand for PCs was “coming back”, but that it was still “a declining business”.
In an analyst call, Whitman then said that “We’re gradually shaping HP into a more nimble, lower-cost, more customer- and partner-centric company that can successfully compete across a rapidly changing IT landscape.”
The company is also reportedly under a lot of business and legal pressure. Business wise, the company has fallen behind in mobile computing at a time when consumers have migrated to smartphones and tablets, and last year lost its place as the largest maker of PCs to Lenovo.
Legally too, the company had been involved in a continuing dispute with Autonomy, a UK-based company it bought for $11.1bn in 2011. A year later, HP said the firm was worth $8.8bn less, accusing Autonomy of misleading them over the true value of the company.
The split in HP’s businesses also comes at a time when other other technology companies have embarked on massive restructuring. IBM sold its PC unit to Lenovo in 2005 and last week closed the sale of its low-end server unit to the Chinese company. Last week, online auction site eBay announced it was splitting off its payments system PayPal into a separate company.
So, how does the new HP look now? The PC and printer groups have always been critical divisions for the company, something Whitman herself had acknowledged for these businesses have offered compelling returns. But, as tech analyst Jack Clark puts it the split-up will leave Whitman with close oversight of Hewlett-Packard’s enterprise group, which will allow it to compete directly with IBM, Oracle and a slew of start-ups seeking to sell hardware, software and services.
As the world of technology is in constant transition, all we could do now is watch out this space and with that Whitman’s next move for sure !
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