Hewlett-Packard is poised to spin-off of its PC and printer arm, in a move that will effectively split the struggling US technology conglomerate in two, according to a person familiar with the situation.
The move marks a reversal for Meg Whitman, the former eBay boss who was brought in three years ago to turnaround the then ailing technology conglomerate.
One of her first acts at the company was to ditch a proposal to shed the PC division made by her predecessor, Léo Apotheker, though she has since left the option open for more radical actions to deal with HP’s problems.
The spin-off plan, which was first reported in the Wall Street Journal, would end a controversial, 13-year chapter in HP’s history that began when then-chief executive Carly Fiorina agreed to buy Compaq Computer, one of the largest US PC makers. Dissent from some members of the HP founders’ families almost led to a rejection of the deal by shareholders.
Ms Fiorina was plagued by years of integration problems at the PC division, though she and other HP executives argued over the years that making PCs gave HP an advantage in its industry-standard server business, which relies on similar technology.
Ms Whitman has succeeded in stabilising HP’s finances and revived flagging shareholder confidence by stringent cost-cutting. However, revenues have contracted and she has struggled to bolster sagging competitiveness in all four of the main business divisions.
Based on last year’s revenues, both parts of HP would have ranked among the 50 largest US companies, according to the annual ranking produced by Fortune.
HP’s PC and printer businesses produced revenues of $55.9bn in its last financial year, almost identical to the combined $55.7bn of its enterprise computing, services and software divisions.
HP’s plan comes the week after eBay unveiled a similar bifurcation by spinning off its Paypal division to shareholders.
Both companies have faced pressure to improve their bottom lines, and had previously argued for keeping their full range of businesses intact, before eventually bowing to a split.
Ms Whitman’s decision to keep the PC division three years ago was seen at the time as the most practical response to a crisis at the company following Mr Apotheker’s botched attempt to reshape its portfolio of businesses.
His announcement that he was considering spinning off PCs was seen on Wall Street as potentially disastrous for the business, since uncertainty about its future threatened to dent sales.
Mr Apotheker also failed with a simultaneous attempt to push HP deeper into software, paying $11bn for UK software company Autonomy. HP later wrote down $8.8bn of the purchase price.
The spin-off would end a controversial, 13-year chapter in HP’s history that began when then-chief executive Carly Fiorina agreed to buy Compaq Computer, one of the largest US PC makers. Dissent from some members of the HP founders’ families almost led to a rejection of the deal by shareholders.
Ms Fiorina was plagued by years of integration problems at the PC division, though she and other HP executives argued over the years that making PCs gave HP an advantage in its industry-standard server business, which relies on similar technology.
Last quarter, HP’s PC division ended two years of falling shipments, but growth in the business was markedly slower than those of rivals Dell and Lenovo, the Chinese group that recently overtook HP as the world’s largest PC seller by volume.
In May, the company said it would axe up to 16,000 jobs as part of its turn round, bringing the total number of forecast job cuts to as many as 50,000.
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