HP plans to split business, say reports

Hewlett Packard is planning to split the company into two separate businesses, according to reports

Hewlett Packard (HP) is planning to turn its consumer computing and printing departments into a separate company, according to reports. The remaining business would comprise HP's software, business servers and IT services operations.

According to a report in the Wall Street Journal, it is the latest strategy by the company to reverse its recent decline. By separating the business, HP could focus on parts of the company that are more profitable.

This is a trend in the IT sector where multifaceted, publicly listed suppliers increase business lines over the years but are unable to gain full potential value from individual parts. 

For example, last week eBay announced PayPal will become a separate company in 2015 after eBay’s board decided it will not be in either operations' benefit to stay together. The split will enable each business to focus separately on growth.

The report said the HP spin-off will be done through a tax-free distribution of shares to stockholders next year.

In 2011, HP considered separating its PC operation after the acquisition of Autonomy. Leo Apotheker, the CEO at the time, said the company was exploring the idea but it never happened.

In its most recent annual financial results, HP reported almost $56bn in sales from its PC and printer business which almost matched the combined revenue of its IT services, server hardware and software.

The planned split would also affect two acquisitions that have weighed HP down. By splitting IT services, HP would include the EDS business it acquired in 2008 for $13.9bn. The value of this acquisition was reduced by almost $9bn in 2012.

Also, the company’s ill-fated Autonomy acquisition would likely be part of the enterprise-focused operation. HP acquired UK software company Autonomy in August 2011 for $11.7bn, but in November 2012 it had $8.8bn written off its value.

Dividing HP into two would also bring its PC business full circle having acquired Compaq for $21bn in a controversial deal in 2002

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