The Schwartz Report

Blog archive

Should HP Be Split Up?

There's no shortage of opinions out there as to what should happen now that Hewlett-Packard has ousted CEO Mark Hurd.

Oracle CEO Larry Ellison blasted HP's board for taking what he felt was a minor infraction and cutting him loose as a result. "The HP board just made the worst personnel decision since the idiots on the Apple board fired Steve Jobs many years ago," Ellison wrote to The New York Times. "That decision nearly destroyed Apple and would have if Steve hadn't come back and saved them."

Meanwhile, Kevin Kelleher revives an idea that was frequently broached at the end of the Carly Fiorina era: break up the company.  Kelleher made his proposal in DailyFinance:

"If the board were really honest with itself about the best strategy, it would use Hurd's departure as an occasion to break the company up into three smaller pieces -- a computer hardware maker, an IT services firm and a printer company. Find a solid CEO for each, and let them focus on what they do best."

While that may be extreme, staying the course could be a tough act to follow. True, while Hurd grew revenues from $87.6 billion in 2005 to $125 billion projected for this year, that was done primarily through mega acquisitions.

The cost of doing so has meant the company has taken on huge debt. Daily Finance's Peter Cohan points out HP's debt has mushroomed from $3.4 billion to $14 billion on Hurd's watch, while its cash position has slipped from $13.9 billion to $13.3 billion.

Hurd's cost cutting, while improving operations has had a price. According to yesterday's Wall Street Journal:

"Caris & Co. analyst Robert Cihra estimates that HP's PC business has effectively driven all revenue growth since Mr. Hurd took over. But operating margins in that business are just 5 percent. And in the last two quarters, HP has been losing share to Asian rivals Lenovo Group, Acer, Toshiba and Asustek Computer at a faster clip.

HP's market-leading printing business generates solid 17 percent margins, but growth is a sluggish 3 percent, estimates Mr. Cihra. The same is true of its services business, which became a big part of HP's business with the acquisition of Electronic Data Systems: 16 percent margins but just 2 percent growth."

Meanwhile, Reuters points out that Hurd reduced research and development spending by 20 percent, noting HP spent only 2.5 percent of sales on R&D. Reuters notes that rivals Apple, Cisco, Dell  and IBM averaged more than 6 percent, meaning HP will need to increase its R&D if it wants to keep pace.

What's next for HP is anyone's guess but the status quo likely won't do. Does the board need to do something as drastic as splitting up the company? What's your recommendation? Feel free to comment below or drop me a line at

Posted by Jeffrey Schwartz on August 11, 2010 at 11:59 AM


  • Microsoft Bolsters Its 5G Chops with Affirmed Networks Acquisition

    Microsoft has acquired Affirmed Networks, buttressing its software-defined networking services just as mobile operators start rolling out 5G wireless technologies.

  • The 2020 Microsoft Product Roadmap

    From the next major update to Windows 10 to the next generations of .NET and PowerShell, here's what's on tap from Microsoft this year.

  • Microsoft To Expand Support for Partner-Built MFA in Azure AD

    Microsoft plans to improve the ability of organizations to use third-party multifactor authentication solutions with the Microsoft Azure AD service.

  • 2020 Microsoft Conference Calendar: For Partners, IT Pros and Developers

    Here's your guide to all the IT training sessions, partner meet-ups and annual Microsoft conferences you won't want to miss. (Now updated with COVID-19-related event changes.)

RCP Update

Sign up for our newsletter.

Terms and Privacy Policy consent

I agree to this site's Privacy Policy.