Subscribe

Hewlett-Packard (HPQ) to split into two public companies. Stock soars. (+video)

Hewlett-Packard (HPQ) said it would split into two listed companies, separating its computer and printer businesses from its faster-growing corporate hardware and services operations. Hewlett-Packard stock jumped 5 percent on the news. 

  • close
    The Hewlett-Packard Co. displayed on a sign outside the company's headquarters in Palo Alto, Calif. Hewlett-Packard Co. (HP) is splitting itself into two companies, one focused on its personal computer and printing business and another on technology services, such as data storage, servers and software, as it aims to drive stronger profitability.
    Paul Sakuma/AP/File
    View Caption
  • About video ads
    View Caption
of

Hewlett-Packard Co (HPQ) said it would split into two listed companies, separating its computer and printer businesses from its faster-growing corporate hardware and services operations.

HP said its shareholders would own a stake in both businesses through a tax-free transaction next year.

Shares of the company, which has struggled to adapt to the new era of mobile and online computing, were up 5.1 percent at $37 in premarket trading on Monday.

Each of the two businesses contribute about half of HP's current revenue and profit.

The move will result in a monumental reshaping of one of technology's most important pioneers, which has more than 300,000 employees and is on track to book $112 billion in revenue the fiscal year ending October.

"Shareholders will now be able to invest in the respective asset groups without the fear of cross-subsidies and inefficiencies that invariably plague large business conglomerates," Ralph Whitworth, former HP chairman and founder of Relational Investors LLC, said in a statement.

Relational owns a 1.49 percent stake in HP, which had a market value of about $66 billion as of Friday.

Many investors and analysts had called for a break-up of the company, or a sale of the personal computer business, so that HP could focus on the more profitable operations of providing computer servers, networking and data storage to businesses.

HP is the latest in a line of companies, often under shareholder pressure, to spin off operations in an attempt to become more agile and capitalize on faster-growing businesses.

Online auction company eBay Inc said last week it would spin off electronic payment service PayPal.

WHITMAN TO LEAD ENTERPRISE

HP's current chief executive, Meg Whitman, will lead the new Hewlett-Packard Enterprise, which will house the corporate hardware and services operations.

Current HP lead independent director Patricia Russo will be chairman of the enterprise company.

HP's printing and personal computing business, to be known as HP Inc, will be led by Dion Weisler, currently an executive in that division. Whitman will be chairman of HP Inc.

Founded by Bill Hewlett and Dave Packard in a Palo Alto, California garage in 1939, HP was one of the companies that shaped Silicon Valley and the PC revolution.

Lately, however, it has struggled to adapt to the shift towards mobile computing, and it has been overshadowed by younger rivals such as Chinese PC maker Lenovo, which is now the world's No. 1 PC maker by shipments.

Dell Inc, which is HP's closest U.S. competitor and facing similar pressure, was taken private by founder Michael Dell last year.

HP's PC business has shown signs of life in recent quarters, growing broadly geographically as businesses replace aging machines.

HP on Monday affirmed its fiscal 2014 adjusted earnings of $3.70 to $3.74 per share. It also forecast 2015 adjusted earnings of $3.83-$4.03 per share, in line with the average analyst estimate of $3.95, according to Thomson Reuters I/B/E/S.

HP's announcement on Monday confirmed a report of the split in the Wall Street Journal on Sunday.

Up to Friday's close, HP's stock had risen nearly 26 percent this year. (Reporting by Supantha Mukherjee in Bangalore, David Henry in New York, Edwin Chan in San Francisco and Bill Rigby in Seattle; Editing by Chizu Nomiyama and Savio D'Souza)

About these ads
Sponsored Content by LockerDome
 
 
Make a Difference
Inspired? Here are some ways to make a difference on this issue.
FREE Newsletters
Get the Monitor stories you care about delivered to your inbox.
 

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...

Save for later

Save
Cancel

Saved ( of items)

This item has been saved to read later from any device.
Access saved items through your user name at the top of the page.

View Saved Items

OK

Failed to save

You reached the limit of 20 saved items.
Please visit following link to manage you saved items.

View Saved Items

OK

Failed to save

You have already saved this item.

View Saved Items

OK