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HP will split in twain, create two new companies

HP's Meg Whitman

HP announces plan to separate consumer and corporate operations into two new companies

HP is going to cut itself in two as it attempts to halt a sharp decline in PC sales and profits. Two new companies will be formed, one for HP’s PC and printer business and one for HP’s range of business, software and enterprise services.

The new consumer company will be called HP Inc. with the business firm dubbed Hewlett-Packard Enterprise. HP is currently in the fourth year of its five-year “turnaround plan” as it tries to adapt to the rise of mobile and cloud computing.

The planned split comes after HP cut tens of thousands of jobs in recent years in a bid to halt its slide. Current chief executive Meg Whitman will be president and CEO of Hewlett-Packard Enterprise and chairman of the HP Inc board.

Whitman said that HP splitting in two was the latest part of its “turnaround plan”, adding that the new companies would have more “independence, focus, financial resources, and flexibility”.

The move is expected to be completed in 2015, with HP shares split through a tax-free distribution. Shareholders in the current iteration of HP will have shares in both new companies.

HP, which was founded 75 years ago and currently employs around 300,000 people, is the second largest PC manufacturer in the world. The size of HP is seen as a big problem by industry analysts with one insider telling the Wall Street Journal that two HPs would be better than one. According to the source HP has higher hopes for its corporate business than its printer and PC unit.

The PC giant isn’t the only tech behemoth splitting in two. Last Tuesday auction website eBay announced plans to spin-off its PayPal online payment unit. Shares in eBay jumped 7.5 per cent on the day as the market reacted favourably to eBay’s announcement.

Established computer manufacturers have continued to struggle as laptop and PC sales decline. Sony quit the laptop business entirely when it discontinued its Vaio line earlier this year. In September Samsung also announced it was pulling out of the laptop market in Europe.

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