One of the US’ most storied tech companies split in two this weekend, another casualty of seismic shifts in the way people use technology.
Hewlett-Packard Co (HP) was an early pioneer of what became the model for Silicon Valley start-ups: Founded in 1939 by two Stanford graduates in a Palo Alto, California, garage, HP was long celebrated for its engineering know-how and laid-back corporate culture. It made hefty profits as it grew into a multinational giant that sold a wide range of computer gear and commercial tech services.
However, after struggling to keep pace with recent trends like the rise of smartphones and cloud computing, HP’s board decided last year to create two smaller companies, each with a narrower focus.
HP Inc will sell PCs and printers; HP Enterprise will sell commercial computer systems, software and tech services. Starting tomorrow, each will trade separately on the New York Stock Exchange.
The old HP “missed the emergence of the Web,” Forrester Research tech analyst Peter Burris said. “They missed the emergence of mobile.”
HP chief executive Meg Whitman said the new spin-offs will be more nimble. Whitman will run HP Enterprise, while PC industry veteran Dion Weisler will lead HP Inc.
Each will be independent, with “flexibility to respond to a constantly evolving market,” Whitman told an investor conference in September.
“With less to focus on, each company will do core things better,” she said.
By dividing HP into roughly equal halves, analysts estimate each spin-off should produce more than US$50 billion in sales next year. However, skeptics say neither will have the clout of the old HP, which became a leading consumer brand while using its vast size to negotiate volume discounts with suppliers and big contracts with business customers.
“They won’t have the impact that HP once had, now that they don’t have the depth of portfolio they once had,” said Rob Enderle, a longtime industry analyst. “It’s not clear what HP is anymore.”
Each of the spin-offs will face significant challenges: Demand for PCs and printers is continuing to decline, as more people use mobile devices and store their documents and photos online in the cloud. And in the commercial computing sector, more businesses are using online software instead of buying servers and other hardware from companies like HP.
The same trends are rocking other long-time tech giants. Microsoft Corp has been forced to change the way it sells software, as fewer people buy PCs that run its Windows operating system. PC-maker Dell Inc is shifting its focus to corporate data centers, paying US$67 billion to acquire commercial computing giant EMC Corp.
Meanwhile, IBM Corp has sold off units that made PCs, servers and microprocessors as profits declined in each. It is investing in new sectors with more growth potential, such as data analytics, cybersecurity and cloud computing.
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