HP Split Creates Two Fortune 100 Companies

PALO ALTO, Calif. (San Jose Mercury News/TNS) -

Hewlett Packard becomes two companies this week, having grown so big through acquisitions that it was in danger of losing its competitive edge.

It’s the biggest split-up in Silicon Valley history, as a computer giant with more than $100 billion in revenue becomes two Fortune 100 companies. One will tackle the rapidly changing technology business and the other will sell personal computers and printers.

And it’s not a moment too soon, say analysts, describing HP as a colossus that was difficult to manage and at risk of falling behind the curve of the massive transition to mobile and cloud computing that has upended the traditional role of corporate IT.

“It got too big to manage, with too many moving parts,” said Patrick Moorhead of Moor Insights and Strategy.

According to HP CEO Meg Whitman, the company is becoming “smaller and more focused” to keep up with the rapidly changing data-center business. “Our timing is absolutely perfect,” she told analysts in September. “Our customers are in a period of transformation and transition. They are grappling with huge changes in their industry with massive shifts in the technology landscape.”

The two companies may be independent, but they will be neighbors, each operating out of HP’s sprawling Palo Alto site, sharing a fitness center and access to the famed HP Labs research and development center.

On Monday, HP divides into Hewlett Packard Enterprise, which will sell data-center technology and services to businesses, and HP Inc., which inherits a $6.8 billion debt load (and $4.5 billion in cash) and will manage a declining market for computers and printers.

HP Enterprise, the company that’s being spun off, gets a new stock ticker, HPE, a new board and Whitman as its chief executive. HP Enterprise will keep the headquarters building on Hanover Street, in Palo Alto, while HP Inc. moves up the hill to Page Mill Road, a 1960s-era building that contains the original offices of founders William Hewlett and David Packard, with furniture and decor from that time.

The separate PC and printer company will have a new 3-D printing business group, anticipating exploding demand. HP’s 3-D printer is close to commercial availability, according to reports.

“We like to say we’re a $50 billion startup,” said Tracy Keogh, HP’s executive vice president for human resources, who will have the same job at HP Inc.

Whitman, who will retain some control over HP Inc. as its non-executive board chairman, has been on a drive to turn around HP since becoming its CEO in 2011, replacing Leo Apotheker, who engineered what proved to be the disastrous $11 billion acquisition of the British firm Autonomy.