Hewlett-Packard Plans To Split In Two, WSJ Reports

Hewlett-Packard — the Palo Alto, Calif., tech giant that has struggled in the past decade to live up to shareholders’ hopes — is preparing to split in two, according to The Wall Street Journal.

Citing “people familiar with the matter,” the Journal said HP will separate its printing and personal computing businesses from its corporate hardware and services operations. The Journal said a formal announcement could come as soon as Monday, Oct. 6. An HP spokeswoman declined immediate comment.

HP is a behemoth with more than $100 billion a year in revenue, and a global headcount that has topped 300,000 in recent years. Earnings have rebounded somewhat from depressed levels a few years ago, but revenue growth has been largely stalled out. As a result, the company’s entire market capitalization currently is just $65 billion. That puts HP far behind tech-sector market-cap leaders such as Apple, Google, Oracle and Facebook, all of which generate less revenue per year.

This isn’t the first time that Hewlett-Packard has tried to streamline itself by splitting off businesses. In 1999, the company’s test and measurement businesses were cleaved off and renamed Agilent. In that case, though, the divested entities accounted for less than a third of HP’s financial performance, market value and headcount. In this case, the split is closer to 50/50.

In the quarter ended July 31, both the printing/personal computing business and the enterprise hardware/services operations accounted for slightly less than $1.4 billion in operating profit apiece. The two halves also had nearly identical quarterly revenue, at about $14 billion.

Tech stock investors may be inclined these days to look warmly on spinoff plans. Just a few days ago, when eBay announced plans to spin off its PayPal payments division, the e-commerce company’s shares jumped almost 8%. Wall Street’s cheers couldn’t have escaped Whitman’s attention, given that she is the former eBay chief executive who negotiated the PayPal acquisition in the first place, by in 2003.

In Hewlett-Packard’s case, it isn’t clear yet how the post-split companies will sort out corporate names and any brand overlaps. Given the extent of HP’s existing efforts to build its consumer brand, though, it’s likely that the HP name will stay with the printing and personal computing operations. That would mean the enterprise side would need to pick a new name.

After the split, the Journal indicated, Whitman will stay involved with both companies, though her largest commitment will be as CEO of the enterprise side. She will also be a non-executive chair of the printing/personal computing company. HP lead director Patricia Russo is slated to become chair of the enterprise business, while HP executive Dion Weisler is due to become CEO of the printing/personal computing business.