News Analysis: HP to split in two

The IT giant's PPS printing and PC division will become a $57 billion standalone company.


HP made a transformational announcement at the beginning of October when it revealed that it would be splitting the company into two parts: an enterprise technology infrastructure, software and service businesses to be called Hewlett-Packard Enterprise and HP Inc, the current Printing and Personal Systems (PPS) division. 

HP Inc will retain the recognisable HP logo and will be led by the EVP at PPS Dion Weisler. HP’s current CEO Meg Whitman will take on the CEO role at Hewlett-Packard Enterprise and also act as non-Executive Chairman at HP Inc. 

HP Inc – and the play on words with ‘ink’ has not been lost on anybody – will become a standalone, stock-market listed company with annual sales of about $57 billion – split approximately 60/40 between the PC and printing businesses respectively. HP has said the transaction will create two more nimble businesses, but a $57 billion company is still a pretty big beast. 

Complex process 

The change won’t happen overnight. A complex decoupling and disentanglement process will now begin and the split isn’t expected to be completed until the end of the company’s 2015 financial year ending 31 October 2015. 

HP almost spun off its PC business a few years ago – a move that was scrapped when Whitman took over as CEO in 2011. Since then, print and PCs have come together under the PPS umbrella division, creating synergies in areas such as supply chain and customer account management. This has made spinning off PPS into a single business an easier thing to achieve; what’s also important is that it will retain the recognisable HP name and blue logo – something that the PC business wouldn’t have had the luxury of back in 2011. 

HP Inc will, of course, face the same challenges PPS faces now in the PC and printing spaces. Both categories have come under pressure in recent years from changing market forces; print sales have been declining in the low-to-mid-single digits over the past couple of years and PC declines have generally been higher than that despite something of a recovery this year due to Microsoft’s ending of support for its XP operating system and a business technology refresh cycle. 

So basically HP Inc will have to grab larger slices of two shrinking pies and/ or come up with new growth areas and strategies. On the former, there are some green shoots with initiatives such as Instant Ink and a longer-term project to increase brand strength in the US supplies business, while in terms of innovation, HP is promising a “new computering experience” and a development in 3D printing; with an announcement expected just after this issue of OPI goes to press. 

What HP Inc will also have is the ability to generate mountains of cash, essentially from the printing side. How it uses this – especially in terms of acquisitions – will be another determining factor in its future direction.