HP Bleeds Again

75 year old giant to break into two separate companies; cut 55000 jobs

Hewlett-Packard has confirmed the speculations about the splitting of the company into two separate units. The company also confirmed its plan to cut another 5,000 jobs and plans to divert the saved money for research and development.

Business analyst Horace Dediu tweeted “HP, eBay, Nokia, Motorola…splitting a business is never a sign of prosperity.” The reasons seem clear enough; as Cantor Fitzgerald analysts Brian White and Isabel Zhu say, “The enterprise IT market is becoming increasingly competitive and the PC market has been in a downturn since the iPad was unveiled in April. Given the challenges in managing a company the size of HP, the negative, long-term secular trends in the PC market that discourage investor attention, we believe a separation makes sense.”

By the end of 2015, the HP of today will no longer exist; one unit will focus on servers, software and cloud technology, and the other will focus on the legacy computers and printers business. Hewlett-Packard Enterprise will be led by current CEO Meg Whitman; while HP Inc. would be led by Dion Weisler, the current executive vice president of HP’s printing and personal systems.
Whitman is reversing an earlier position that the company should remain a single enterprise. The current announcement comes as HP approaches the fourth year of its five-year turnaround plan. In an investor presentation on its website, HP has stated clearly that in addition to the previously-announced 45,000 to 50,000 total employee reductions, HP will cut another 5,000 jobs.

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