HP CEO: Biggest corporate split-up ever is no distraction

1 Comment

The self-imposed breakup of Hewlett-Packard is the largest corporate separation ever undertaken, but somehow it hasn’t caused a missed step at the company, according to HP CEO Meg Whitman. HP announced the plan to split itself into two entities — HP Enterprise with storage, servers, cloud and services and HP Inc. with PCs and printers, in October.

“This is a big and complicated separation — the biggest ever done. This is not a spin-off, but two Fortune 50 companies, both with about $57 billion in revenue,” Whitman said on the company’s fourth quarter earnings call. “But this is HP at it’s best — an execution machine.”

Funny, you’d think something that colossal might be a distraction. But Whitman and CFO Cathie Lesjak insisted to analysts that was not the case and that in fact it was a good exercise. “This is the totally right thing to do for this company. It’s a chance to clean-sheet two new Fortune 50 companies and it’s remarkable how that focuses the mind,” Whitman said.

“We saw no disruption in Q4,” Whitman said. Some 400 to 500 people at HP are involved in split-up planning with the remaining 270,000 other HP employees continuing to run the business, she said. (About 41,000 employees left the company during the fiscal year as part of buyouts or other attrition.)

The logistics are daunting. [company]HP[/company] comprises 786 legal entities, and for the breakup there is a separation management office both for the proposed HP Enterprise and HP Inc. companies.

The intertwined IT for those proposed companies must be disentangled, and HP needs to come up with three years of financials for what will be the new corporate units. That means a ton of forensic accounting since, obviously, all those accounts are also intertwined.

That’s gotta be expensive.

Lesjak would not put a price tag on the cost of that effort but said HP will provide some indication of that on the first quarter call. Here’s more on HP’s fourth quarter results.

Feature art courtesy of Shutterstock user Mincemeat

1 Comment

jhesr

I still don’t understand why they want to split up. It seems to me that staying intact gives them better purchasing power, which is a competitive advantage. They’ve also got over 50% market share in printing. A dying cash cow that throws off a ton of profits. Why wouldn’t they want to milk that cash and use it to buy their way into relevance, in growing markets like cloud? They could take that money and buy Rackspace. Or they could acquire some newer software companies like Tableau, Splunk, Service Now, New Relic, etc.

The breakup doesn’t make any sense to me. I don’t buy the nimbleness argument. If they aren’t nimble enough they could always rearrange the management so there is less bureaucracy and more independence. You don’t have to split up to do that.

Comments are closed.