On HP Split: Is the break-up sound corporate strategy?

HP (Hewlett Packard) think tanks concluded that a split of the Company into two will undoubtedly result in positive gains in the future. One company will be handling exclusively the personal computer and printing side of the business. While the other company will deal with technology services – such as data storage, servers and software.

What is the main reason for the break-up? The corporate world is well aware that HP as an entity has been hurting badly with operational revenues declining in the past 12 quarters. The decline in revenue has resulted in the lay-off of tens of thousands of employees as the company attempts to streamline operations and cut costs. So, rather than wait for the entire company to fold-up, splitting the company in two could spur growth quickly.

What caused the decline in company revenues? The decline in revenue could only be attributed to outside pressures and not from within like unsound company practices. Consumer preference has shifted away from desktops and laptops. In the previous years, HP made the killing in the supply of PCs, laptops, and technology services. HP may have been too complacent that the trend will continue and was caught with their pants down when smart phones and tablets became instant sensations.

Would the split resolve the issue or a corporate juggernaut that can bring HP down to its knees? HP will rely heavily on focused operations to increase sales. Just like eBay that found tremendous success after the company spin-off. Hewlett Packard hopes that the spin-off business unit will be able to drive growth. This is to take the lead from eBay payment service PayPal that has become the fastest growing segment developing into a separate publicly traded company.

Is HP split a recent decision? The break-up was actually planned as early as 2011, but the stakeholders decided against it because of certain company issues. HP CEO Meg Whitman divulged that for the turnaround HP has now shored-up business enough to support the split. Further, Whitman pointed out that the split gives the two companies the independence, focus, financial resources, and flexibility needed to adapt quickly to market and customer dynamics.

Hewlett Packard split is creating ripples in the Industry, it looks like a sound corporate strategy. If it continues, HP can pour in effort to maintain its edge in technology services and cash-in on the expected revenue viability.

Credit: freedigitalphotos.net

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