News

Hewlett-Packard Split Becomes Official

• By Jeffrey Schwartz
• November 02, 2015

One of the oldest players in the technology industry has officially split into two.

As of Nov. 1, Hewlett-Packard Co. is now two separate companies -- HP Inc., which is made up of the former company's PC and printer business, and Hewlett Packard Enterprise (HPE), which provides IT infrastructure and services. The split is the culmination of a shift in strategy announced a year ago.

To mark the occasion, Meg Whitman, former CEO of HP and current CEO of the new HPE, as well as chairman of HP Inc., rang the opening bell of the New York Stock Exchange on Monday. Combined, the two new companies recorded more than $110 billion in revenues for the most recent fiscal year; split into two companies, HPE accounted for $53 billion and HP Inc. $57 billion.

Wall Street analysts have been exploring the idea of the original HP splitting into two companies since its merger with Compaq Computer Corp., which was largely met with doubt, more than a decade ago. When Whitman took over as HP's CEO four years ago, she overturned a hastily announced plan to sell off HP's PC business, arguing that having PCs and enterprise hardware offerings gave the company greater scale than rivals Dell, IBM and Lenovo. Last year, Whitman reversed course yet again and announced the impending HP split, saying that two companies would be more competitive than one.

Notably, that's the polar opposite of the direction that Dell has taken; the company last month announced its acquisition of EMC and its stake in VMware for $67 billion, making it the largest acquisition ever for the IT industry.

"They are two diametrically opposed strategies," Whitman told CNBC's David Faber in an interview from the NYSE on Monday morning. "It's quite interesting that we have chosen to de-leverage our balance sheet to get smaller [and] to be more nimble and lean into new technology like our 3PAR all-flash storage array, like the next generation of networking and servers and our software business, while Dell has chosen to get much bigger, lever way up and really consolidate and make a cost play around older technology. We looked at Hewlett-Packard's strengths and we said being smaller and more nimble in this market is a huge advantage."

Some analysts disagree, including Sanford C. Bernstein & Co.'s Toni Sacconaghi, who told The Wall Street Journal that "a big part of the market is moving in a single direction, and [HPE] arguably doesn't have offerings to cater to those [customers]. 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."

Those "traditional" vendors he identified were IBM and Oracle, which Sacconaghi argued have better-articulated hybrid cloud strategies than HPE. Last month, HP said it was shutting down its public cloud, opting to resell cloud services from Amazon Web Services (AWS) and Microsoft.

"The truth is that Amazon and Azure are way out in front in the public cloud, and our view was is there a way to partner with them while we provide the hybrid environment," Whitman told CNBC's Faber. "It's the classic where to play, and how to win, and we decided we have a better chance of being the leader in private cloud and virtual private cloud, managed private cloud, and then, of course, our Cloud System Automation that helps you orchestrate your cloud in a multi-cloud environment."