Reports are beginning to surface that HP is planning to break into two distinct business with an announcement coming as early as Monday morning. The plan would be to spin off its PC and Printer business unit from its Enterprise and Services BU. According to WSJ, it was noted that CEO Meg Whitman will become chairman of the PC and Printer business unit, and remain CEO of the Enterprise BU as well. In addition, senior exec, Dion Weisler reportedly will become CEO of the PC business.
HP had previously been down this path in 2011 but after CEO Leo Apotheker stepped down, under the guidance of Meg Whitman, the company decided to keep operations together as a single entity.
The Palo Alto-based company has been on the ropes as of late, losing market share to the likes of Lenovo, which took the lead as top PC manufacturer back in 2012. Razor thin margins of the PC business have been counter-balanced by HP’s healthy Printer business where ink consumables offer a big profit center for the company still and HP’s brand equity is strong.
Further, previous merger talks with storage giant EMC were stalled, reportedly due to the PC and Printer business units at the time being thought of as an operational liability that would hold back the possible combined Enterprise powerhouse tag-team. Generally speaking, splitting consumer products away from the enterprise product division within HP could open up opportunities for strategic partnering for HP down the road.
The move could allow the two divisions to focus on their core product offerings and go-to-market strategies that are decidedly different between consumer products and the enterprise. The move could signal renewed focus and commitment by HP with respect PCs and Printers, while allowing the Enterprise group more flexibility to react for its own needs as well.
Then again, as analyst Patrick Moorhead, from the firm Moor Insights and Strategy notes, “The two smaller companies will have less negotiating power than the combined HP does now.” Logically, two smaller HP businesses would conceivably have less demand clout with chip suppliers like Intel, or WD and Seagate for storage products. Should the break-up come to pass, it would make sense that HP somehow manages to maintain combined demand pipelines with key common component suppliers, affording the company the agility it needs as separate operations while maintaining critical mass buying power.
I expect we’ll hear more tomorrow when the rumors are expected to become official news.
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