Rumor to Reality: HP to Split into Two Companies

Splitting up the company seems to be in vogue these days. eBay just recently announced that it will divide its Paypal investment into a separate entity, and now it seems HP is on the same track.

Rumored over the weekend, HP today has confirmed that it will split out its company into two, distinct companies: HP, Inc. and Hewlett-Packard Enterprise. The line of demarcation defines two very diverse focuses for the company.

HP, Inc. will assume the PC and printer side of the business, or rather, the consumer side. Investments will still be made, such as in 3D printing, but the PC and printer industry has been on a decline over the past couple years. Dion Weisler will become President and CEO of HP, Inc.

Hewlett-Packard Enterprise will control the enterprise technology, software, and services business. This new entity represents the majority of HP's investments over the past year or so, which include Moonshot servers and HP Helion (Cloud). In reality, this focus represents the areas HP believes embodies its future. Meg Whitman will become President and CEO of Hewlett-Packard Enterprise.

According to HP's CEO, Meg Whitman, the split is just another step in the company's turnaround plan. The goal for a complete turnaround was 5 years. With just 1 year left, some feel that more drastic changes need to be made to ultimately be successful. A company split is about as drastic as the company can get. This is not the first time a split has been considered. Whitman's predecessor, Leo Apotheker, suggested a similar direction back in 2011. The transaction is expected to be completed by the end of fiscal 2015. HP shareholders will own shares of both Hewlett-Packard Enterprise and HP, Inc.

Whitman justified the move now by stating the split will allow both companies the independence and financial resources each needs to become agile in a highly competitive market. But, while this sounds good, it's possible this is just marketing fodder. HP has had a tough time keeping up with leaders in both the PC and Cloud spaces. HP is considered by many to be an old-school company still promoting ideals that were retired a decade ago.

A split like the one proposed, could help the company shed its old, big-iron image, allowing it to become laser-focused on the modern market. Well, at least one of the companies will benefit from the change.

HP's official statement is now online. The company has produced a page dedicated to the announcement: http://www.hpannouncement.com/

The split also has another effect. HP has been laying off employees at a considerable pace, but has renewed its intent today by stating to investors that a total of 55,000 people will be affected once it is done restructuring.