HP to split into two, PC & printers to separate from enterprise unit
Hewlett-Packard (HP) said on Monday it plans to separate into two new publicly traded Fortune 50 companies: one comprising HP's enterprise technology infrastructure, software and services businesses, which will do business as Hewlett-Packard Enterprise, and one that will comprise HP's personal systems and printing businesses, which will do business as HP Inc. and retain the current logo.
Immediately following the transaction, which is expected to be completed by the end of fiscal 2015, HP shareholders will own shares of both Hewlett-Packard Enterprise and HP Inc. The transaction is intended to be tax-free to HP's shareholders for federal income tax purposes.
The announcement comes as HP approaches the fourth year of its five-year turnaround plan.
"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," said Meg Whitman, chairman, president and chief executive officer of HP.
"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," she added.
Goldman Sachs & Co. is serving as financial advisor and Wachtell, Lipton, Rosen and Katz is serving as legal advisor to HP.
Meg Whitman, president and CEO of HP, and Cathie Lesjak, CFO of HP, will hold these positions with Hewlett-Packard Enterprise. When the separation is complete, Whitman will also serve on the board of Hewlett-Packard Enterprise, and Pat Russo will move from lead independent director of HP to chairman of Hewlett-Packard Enterprise.
Dion Weisler, executive vice president of HP's Printing and Personal Systems business, will lead HP Inc. as president and CEO. Whitman will serve as non-executive chairman of HP Inc.'s board.
Hewlett-Packard Enterprise will have a portfolio and multi-year innovation roadmap across technology infrastructure, software and services to allow customers take advantage of the opportunities presented by cloud, big data, security and mobility. By leveraging its HP Financial Services capability, the company will be positioned to create technology deployment models for customers and partners based on their specific business needs. Additionally, the company intends for HP Financial Services to continue to provide financing and business model innovation for customers and partners of HP Inc.
The separation will provide additional resources, and a reduction of debt at the operating company level, to support investments across key areas of the portfolio. The separation will also allow for greater flexibility in completing the turnaround of Enterprise Services and strengthening the company's go-to-market capabilities.
"Over the past three years, we have reignited our innovation engine with breakthrough offerings for the enterprise like Apollo, Gen 9 and Moonshot servers, our 3PAR storage platform, our HP OneView management platform, our HP Helion Cloud and a host of software and services offerings in security, analytics and application transformation," continued Whitman.
HP Inc's profitability and free cash flow will enable investments in growth markets such as 3-D printing and new computing experiences.
"This is a defining moment in our industry as customers are looking for innovation to enable workforces that are more mobile, connected and productive while at the same time allowing a seamless experience across work and play," said Weisler.
"As the market leader in printing and personal systems, an independent HP Inc. will be extremely well positioned to deliver that innovation across our traditional markets as well as extend our leadership into new markets like 3-D printing and new computing experiences â€“ inventing technology that empowers people to create, interact and inspire like never before," he added.