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Hewlett-Packard plans to split into two companies: WSJ report

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Hewlett-Packard plans to split into two companies, separating its computer and printer businesses from its corporate hardware and services operations, the Wall Street Journal reported on Sunday - PHOTO: REUTERS

[SAN FRANCISCO] Hewlett-Packard plans to split into two companies, separating its computer and printer businesses from its corporate hardware and services operations, the Wall Street Journal reported on Sunday.

The company plans to announce the move as early as Monday, the Journal said in a report on its web site that cited people familiar with the matter. The division would be made through a tax-free distribution of shares to stockholders next year, according to the report.

A company spokeswoman declined to comment on the report.

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 to capitalize on faster-growing businesses. Last week online auction company eBay Inc said it would spin off electronic payment service PayPal.

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HP and some of its investors have long considered such a move, the newspaper noted. As one of the older big computer companies, for several years HP directors have discussed ways to restructure to keep up with technology upstarts.

A source familiar with the matter said HP had held merger talks with storage and cloud-computing firm EMC recently, as a way of moving more forcefully into online services.

Many investors and analysts have 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.

Company executives have said in the past that personal computers underpin and support the company as a whole. HP did consider spinning off its PC division in 2011 under then-CEO Leo Apotheker, but ultimately decided against the idea.

The PC business has shown signs of life in recent quarters, growing broadly geographically as businesses replace aging machines. Even so, the report of the plan to split off that business surprised some on Wall Street. "I wonder what would have changed in the board's thinking that previously they thought they needed computers together with services to properly serve large enterprises to now," said Hudson Square Research analyst Daniel Ernst. "PCs and printing remain in long-term secular decline, and while HP has managed that business well, the challenges for that portion of the split company will only grow as the demand continues to erode, and commoditization forces prices down further." The Journal, citing one of its sources, said the plans call 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.

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, the report said. - Reuters

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