HP Splitting Business In Two
HP will break up its business, separating the consumer PC and printer business from its corporate hardware and services operationsReuters

US computer giant Hewlett Packard (HP) has confirmed it will split into two listed companies, separating its computer and printer businesses from its faster-growing corporate hardware and services operations.

Reports emerged over the weekend about the split, and on 6 October, 2014, HP confirmed the move in a statement.

The split will create HP Inc, which will focus on the company's PC and printer divisions while adding a focus on 3D printing and what it described as "new computing experiences."

The second business to be created will be called Hewlett-Packard Enterprise which will focus on the company's corporate computing, software, infrastructure and services as well as its finance division.

The split will be through a tax-free distribution of shares to stockholders in 2015, the company said.

HP is a company which has been struggling in the post-PC era where mobile computing dominates. It lost its position as the world's number one PC manufacturer to Lenovo in 2013 and while it has in recent months seen something of a resurgence, the company's CEO Meg Whitman has said it is still "a declining business".

Whitman will become chairman of HP Inc while she will remain as CEO of Hewlett-Packard Enterprise.

Whitman said in a press release today:

"Our work during the past three years has significantly strengthened our core businesses to the point where we can more aggressively go after the opportunities created by a rapidly changing market... The decision to separate into two market-leading companies underscores our commitment to the turnaround plan. It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders. In short, by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders."

Potential

The company's corporate hardware and services division has better long term potential than the PC and printer businesses.

Speaking to the Wall Street Journal, former HP chairman, Ralph Whitworth said: "This would be a brilliant move at just the right moment in the turnaround. It would liberate significant trapped value."

HP is currently in the midst of a huge restructuring plan and has had to lay off tens of thousands of employees over the last couple of years.

One of the biggest issues it has faced is its legal spat with Autonomy, the UK-based company it bought in 2011 for £7bn ($11.2bn), but which HP said a year later was worth just a fraction of that value, accusing Autonomy of misleading the computer giant, and calling for its founder Michael Lynch to be "held accountable for fraud".

This is not the first time the spinning off of its PC division has been considered, but previously pressure from shareholders prevented this from happening.