When it comes to technology companies, being big may not be the best. In the mid-1990s, IBM, then the world’s leading IT company, had to wrestle with its size. It eventually divested product lines that were deemed to have low margins to focus on software and services. Out went its printers and hard drives. In 2005, IBM sold its personal computer business, including the ThinkPad notebooks to Lenovo. And last week, it officially pulled out of the x86 server market with the sale to Lenovo.
It looks like HP is facing size challenges and taking the same route as IBM of old. While IBM slumbered, HP went on an acquisition spree, chomping up Compaq, EDS and 3Com and many others. It became the world’s top technology company with revenues exceeding US$100 billion.
However, yesterday, HP announced plans to split into two companies — HP Enterprise to focus on enterprise technology infrastructure, software and services businesses, and HP Inc, which will concentrate on the PC and printing businesses.
Just how this move pans out can only be seen at the end of next year.
“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,” said Meg Whitman, Chairman, President and Chief Executive Officer of HP.
Whitman will be President and Chief Executive Officer of Hewlett-Packard Enterprise while Dion Weisler, Executive Vice President of HP’s Printing and Personal Systems business, will lead HP Inc as President and Chief Executive Officer.