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HP announces split, adds 5,000 layoffs

Posted: 07 Oct 2014 ?? ?Print Version ?Bookmark and Share

Keywords:layoff? HP? client and cloud computing companies?

Hewlett-Packard announced it is splitting into two smaller companies. Separately, HP announced plans to lay off 5,000 more employees and revealed it is still mulling a possible acquisition, rumoured to be storage specialist EMC.

Like its traditional rivals Dell, IBM and Oracle, HP has been caught flat-footed by the industry's split into smartphones and tablets on the client side and cloud services on the back end. By creating separate client and cloud computing companies, HP no longer straddles this growing gap.

But it's not clear the two big companies will fare substantially better than the single giant. Market, employee and analyst response to the split met with muted response.

HP Inc. will sell printers and PCs and retain the HP logo while HP Enterprise will sell servers, storage and networking gear and services. Meg Whitman will be chief executive of HPE and chair of HP Inc. Dion Weisler, the head of HP's PC and printing group, will be CEO of HP Inc.

HP announces split

By the numbers: Two separate, but fairly equally sized companies.

The two companies will each have about $57 billion in revenues, $5 billion in operating profits and be more "focused and nimble," she said in an early morning conference call. "The market is moving incredibly rapidly, and nimbleness may be the defining characteristic" for successful companies, Whitman said.

On the call, analysts challenged Whitman who refused to split off the PC division in 2011 when she first joined HP as part of a three-year turnaround which has yet to gain significant traction. The company has the financial and organisational strength for the divestment now that it lacked then, she said.

The call was peppered with discussions of "dis-synergies" the split creates, details HP execs said they will manage aggressively. As part of its cost management, HP increased by 5,000 the number of people it plans to lay off, bringing the total to as much as 57,000. In May the company added 16,000 layoffs to the plan the restructuring plan announced in 2012 to lay off 36,000 workers. (Read more:HP to lay off additional 16,000)

The additional layoffs are not linked to the separation. Indeed, the split will no doubt spawn some duplication in corporate positions, something HP aims to mitigate with service agreements between the two new companies.

Having weathered a strong of corporate layoffs and scandals in recent years, HP employees are taking a philosophical wait-and-see view of the split.

"Most engineers don't get too excited when things are first announcedthey want to know the details before acting if at all," said one veteran HP engineering manager who asked not to be named.

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