HP does the splits, again

Inside the enterprise: Restructuring plans are nothing new at Hewlett Packard. Over the last few years, the firm has gone through several waves of reorganisation, as well as changes at the top.

Under Mark Hurd, Leo Apotheker and most recently, current CEO Meg Whitman, HP seems to have been in a constant state of flux.

Even earlier this year, after a period of relative stability or at least, with only one restructuring plan on the table - the company conceded that it might need to cut even more jobs than it envisaged.

It seems even that is not enough to restore growth and margins at HP. The latest plan is to split the company's printer and personal computing arm from its software, services and enterprise hardware division.

In this, HP is following a path set by IBM, which has moved out of printers, PCs and also lower-end servers, to focus on higher end equipment and services. IBM, though, has taken a different route to HP's proposed new structure. Although IBM's printing operation was set up as a separate company, Lexmark, its PC and low-end server business were transferred through a trade sale to Lenovo.

HP is suggesting a split of its business into two listed companies, one containing the printing and personal systems (PPS) arm, and the other, the enterprise products and services. But there will be an overlap in management, with Meg Whitman as chairman of HP Inc, the former PPS division, and also CEO of HP Enterprise.

Like previous proposed splits, the idea behind creating two HPs is to unlock value in the business: over the years HP has become a large, and some argue, unwieldy organisation. But the company could also be taking advantage of better sales in its PC and printer arms, which together now make up half of its revenues.

Future growth, though, is more likely to come from software and services than PC hardware, suggests Forrester analyst Peter Burris. He points out that HP has traditionally relied heavily on hardware sales, and associated maintenance revenues, for its profits. "The pressure is on to shift the focus to software and related technology services, which is where [there is] greater value."

Research firm Gartner, though, argues the proposed split has less to do with technology, and more to do with its financial structure, and its shareholders. In a research note, the firm says that split at HP is primarily around creating shareholder value the announcement has already boosted HP's share price and helping the organisation to become more focused.

But the arrangement will not, immediately at least, do anything to address "HP's core challenge of finding growth, or to directly address its shortcomings in cloud, software as a service (SaaS) and mobility", the analysts say. This will, no doubt, require further work.

But Gartner also believes that the new deal will have little immediate impact on IT buyers, which should reassure CIOs, at least for now.

Stephen Pritchard is a contributing editor at IT Pro.