In HP Split, Each Unit To Face a Test

If you cut one slow-moving mega-company in half, do you get two fast-moving innovators? Not even Meg Whitman, chief executive of Hewlett-Packard Co., is promising that. Whitman announced Monday that the computer industry giant will cleave itself in two: one company for its personal computer and printer business, another for its "enterprise" computing operations.

The split will provide each new company with "the independence, focus, financial resources and flexibility" they need to compete for customers and generate long-term shareholder value, Whitman said in a prepared statement.

The reaction from industry analysts was more like a golf clap than the standing ovation they gave to the EBay's announcement last week that it would carve out PayPal into a separate firm.

"Although we are less bullish on this split than on the EBay/PayPal split announced a week ago, we still think that this development is a small net positive for the stock," FBN Securities analyst Shebly Seyrafi wrote in a research note. "The split creates more focused companies that can arguably become more nimble vs. the competition."

No one would use the world "nimble" to describe today's Hewlett-Packard, whose revenue has practically flat-lined for the last five years.

Whitman will run the business services company, to be dubbed Hewlett-Packard Enterprise. ("Enterprise" is an industry buzzword that means selling stuff like computer servers, storage systems, software and services to global corporations.)

The other company, to be named HP Inc., will compete in the cutthroat, low-margin businesses of printers and personal computers: desktops, laptops, tablets and the like. HP veteran Dion Weisler takes on that challenge as chief executive, while Whitman will look over his shoulder as non-executive chairman.

They'll both have to prove themselves as innovators.

Since Whitman took charge in September 2011, HP's stock price has appreciated 62%. But that's largely due to cost-cutting and stock buybacks.

In 2011, HP employed...

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