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Chronicles

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HP is better not together — company to split into enterprise and PC/printer businesses

company to split into enterprise and PC/printer businesses —  It's true.  The HP IT giant is dividing into two smaller, but still large entities, one focusing on enterprise IT, the other on PCs and printers.  —  Hewlett-Packard is now forging ahead with plans …

Gigaom Barb Darrow

Context & Ripple Effects

This is HP reversing itself twice over. In August 2011 the company said it preferred to spin off its PC unit, then in March 2012 it went the other way and folded the printer and PC groups together in what was billed as a major restructuring. Today's confirmed announcement ends the debate: HP will separate into two publicly traded companies, Hewlett-Packard Enterprise and HP Inc., with completion targeted by November 2015.

The framing matters: per Re/code's same-day report, this is a revival of the three-year-old breakup plan after attempts to sell off individual business units failed. The story travelled widely on day one — the Wall Street Journal, New York Times, CNNMoney, Business Insider and Gizmodo all picked it up — reflecting how much scrutiny HP's structure has attracted since 2011.

First-order effects

  • HP shareholders will end up holding stock in two listed companies — an enterprise hardware-and-services firm and a PCs-and-printers firm — rather than one conglomerate straddling both, once the separation completes by November 2015.
  • The newly standalone PC-and-printer business inherits the low-margin fight HP had already been waging there, including the $200 Stream laptops and $100 tablets launched in September as Microsoft's answer to Chromebooks.

Second-order effects

  • The enterprise company no longer carries the consumer PC drag, freeing it to press differentiated bets like the ARM-based Moonshot server line it pushed into general availability just days before the split announcement.
  • Rivals in each segment now face a more focused counterpart: PC and printer competitors confront a dedicated volume player, while enterprise hardware and services competitors meet a firm whose portfolio and incentives are no longer diluted by consumer lines.

Third-order effects

  • The 2011-to-2014 sequence — spin-off preferred, then merger of PC and printing, then full separation — illustrates why scale conglomerates spanning consumer devices and enterprise infrastructure have become hard to manage, pushing the industry toward focused pure-play structures.
  • If other diversified hardware vendors face the same investor pressure, the template of splitting enterprise operations from consumer device arms could become the standard restructuring playbook, with activist investors and boards weighing separations over divestitures.

The trend: Large diversified hardware conglomerates are unbundling into focused enterprise and consumer-device pure plays, with HP's confirmed split the clearest data point yet.

Related: HP · HP plans to split into two businesses · HP's split into Hewlett-Packard Enterprise and HP Inc. · HP to combine printer and PC groups (2012)

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