Exactly how this transaction changes anything except stock ticker symbols is a little difficult to see. The new Enterprise company will still be competing against SAP S.E. (NYSE: SAP), International Business Machines Corp. (NYSE: IBM) and Oracle Corp. (NYSE: ORCL) and the hardware business, at least the PC part of it, will be going against Lenovo and other Asian makers. HP is not winning big in either hardware or software now, and the split may simply accentuate the weaknesses of each half of the company. As a single company, HP is nearly unique; as two companies, it is one of two herds. How does that help?
HP will also increase its total number of firings by 5,000, to 55,000, according to The Wall Street Journal. HP has already fired 36,000 people under its restructuring plan. HP also reaffirmed its earnings per share guidance for the 2014 fiscal year in a range of $3.70 to $3.74, and it provided an estimate of earnings per share for 2015 of $3.83 to $4.03.
ALSO READ: Ratings Agency No Fan of eBay-PayPal Split
Each of the new companies is expected to post annual revenues of around $50 billion once the separation is completed.
The Enterprise company will include infrastructure, software and services and will be headed by current HP CEO Meg Whitman, who will also be chairman of the board of HP Inc., the hardware company formed from HP’s personal systems and printing businesses. The new HP Inc.’s CEO will be Dion Weisler, who is currently executive vice-president of HP’s printing and personal systems businesses.
HP CEO Meg Whitman will be the president and CEO of the Enterprise company, as well as chairman of the board of HP Inc. The current lead independent director of HP’s board will become chairman of the board of the new Enterprise company.
What’s interesting here is that former HP CEO Leo Apotheker had decided on the same split before he was replaced in 2011 by Whitman, who then reversed Apotheker’s decision claiming that PCs and printers were essential to HP’s business relationships with its customers.
When Whitman combined the profitable printer business with the PC business in 2012, she paved the way for the split that was announced Monday. In the most recent quarter, the hardware businesses posted nearly 50% of the company’s total revenue, and operating profits were up 45% year-over-year for the quarter to $346 million in the PC business and up 18.4% to $1.03 billion in the printer business.
Shareholders obviously are happy. The stock was up about 7.5% Monday to $37.82 in premarket trading. The stock’s 52-week range is $20.25 to $38.25.
ALSO READ: 8 IPOs Coming Next Week
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
