Hewlett-Packard has confirmed rumors that the company will be split into two entities: Hewlett Packard Enterprise and HP Inc., which will become separate publicly traded companies by the end of fiscal 2015 which ends in October of next year.
Headed by HP CEO Meg Whitman, “HP Enterprise” will sell enterprise hardware (servers, storage and networking gear), enterprise software and services, and cloud services. The PC and printer businesses will become known as “HP Inc.”
Commentators have noted that following the split, HP Enterprise will look similar to IBM, which has divested itself of much of its consumer-oriented business in recent years. Unloading HP of its PC business was one of the ideas explored in 2011 during Leo Apotheker’s short stint as CEO of HP.
The split will is expected to free up cash for HP Enterprise to grow organically through product development initiatives such as HP Labs and research into areas of cloud computing, big data, security, mobility, and 3-D printing. The cash will also allow it to explore potential acquisitions, which has spurred speculation around its next move.
In September, The Wall Street Journal reported that HP was in talks with storage and IT provider EMC on a merger. EMC, which owns an 80 percent stake in cloud software provider VMware, would likely find HP Enterprise appealing because it would include complementary business units without the printer and PC business units. The New York Post has reported that HP Enterprise could be interested in taking control of VMware itself.
It’s interesting to note that the PC and printing operation which will become HP Inc. made around $1.4 billion in revenue, and contributed about half of HP total earnings in its last reported quarter. However, printing is about three-times more profitable for HP than selling PCs.
At the same time, HP has been aggressively cutting its workforce dramatically to put more resources into research and development. On Monday, it announced a further 5,000 layoffs to the previously announced 45,000 to 50,000 job cuts to be terminated by the end of 2015.
It will take some time for the results of this massive restructuring to become clear, but the expectation is that these measures are necessary for the 75-year-old HP corporation to remain competitive and stay ahead of competition in an IT landscape where change is constant.