Silicon Valley Tech Icon HP Ready For Its Weekend Break-Up

31 Oct 2015 | Author: | No comments yet »

Bye-bye HP, it’s the end of an era.

SAN FRANCISCO (CBS/AP) — One of the nation’s most storied tech companies will split in two this weekend, another casualty of seismic shifts in the way people use technology — and big-company sluggishness in responding. 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.On Monday morning, Meg Whitman will ring the bell at the New York Stock Exchange as the brand-new company she will lead, Hewlett Packard Enterprise Co. 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. This is not the first seismic shift to shake the storied tech pioneer—it spun out its bread-and-butter test and instruments division as Agilent A 0.16% in 2002 — but it is definitely the biggest.

Exactly when things went off the rails is subject to debate, but many point to the controversial acquisition of Compaq Computer in 2001 by HP’s then-CEO Carly Fiorina as the start of the decline. Since then, the company’s had to weather such self-inflicted wounds as a pretexting scandal in which a board member, an executive and HP-paid investigators faced criminal charges for spying on journalists; the $1 billion acquisition of Palm Computing in 2010 to beef up HP’s mobile capabilities; then the sale of Palm’s intellectual property.

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. Then there were other bigger, more questionable acquisitions notably HP’s $13.9 billion buy of EDS, the giant computer services company in 2008; followed three years later by its $11 billion bet on Autonomy, a software company. Each will be independent, with “flexibility to respond to a constantly evolving market,” Whitman told an investor conference last month. “With less to focus on,” she added, “each company will do core things better.” By dividing HP into roughly equal halves, analysts estimate, each spinoff should produce more than $50 billion in sales next year. And in the commercial computing sector, more businesses are using online software instead of buying servers and other hardware from companies like HP. He plans to use his newfound freedom to increase the percentage of revenue devoted to research and development beyond the 3.1% level that the old H-P achieved last year. “We generate an enormous amount of cash inside the printing and personal systems franchises,” said Mr.

Weisler. “Those investments weren’t always channeled back into these businesses.” HP Inc. will return a lot of its profits to investors as dividends, but Mr. And then there was an almost farcical round robin of screwups that included the hiring of Leo Apotheker as CEO in September, 2010 only to fire him a year later, largely due to the Autonomy deal which degenerated into charges and countercharges of fraud between HP and former Autonomy execs. HP recently said it’s giving up on competing directly in cloud computing, a growing business in which companies large and small run software in remote data centers operated by Amazon and others.

Bernstein & Co. “A big part of the market is moving in a single direction, and H-P arguably doesn’t have offerings to cater to those [customers],” Mr. When Whitman, his successor, took the helm, she claimed that would be a mistake given the cost advantages HP got from chip and storage suppliers by fielding both a PC and server business.

Sacconaghi said. “Traditional vendors have challenges in terms of that migration, but you could argue that others have at least taken more visible, positive steps in that direction.” H-P cloud guru Bill Hilf said in an interview last month that the majority of corporate spending would continue to be made on systems in corporate data centers, and that H-P would partner with companies such as Amazon and Microsoft to sell cloud services to customers that demand them. Along with external pressures, HP has struggled with internal problems — a series of controversial CEOs, botched acquisitions and scandals involving top executives and directors. HP subsequently started soft pedaling that notion, and last week threw in the towel on the public cloud business, refocusing (again) on helping customers use Amazon or Microsoft MSFT -1.35% Azure to backstop their HP private clouds.

In a hybrid situation if there is a spike in the workload handled by company resources, the additional work get shipped off to a public cloud partner. As for the new spinoffs, Forrester’s Burris said he’s not ready to count them out. “It’s reasonable to think both can be thriving companies, but a lot will come down to the quality of their management.” Time will tell, but now that the HP split is nearly final, we’ll get to see if the two pieces can function better than HP as a whole did over the past decade.

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