HP's Split: Moves of a Declining Company

Hewlett-Packard CEO Meg Whitman announced in 2014 that the 76 year old company would be splitting into two publicly-traded companies, HP Enterprise and HP Inc. Now we are finally seeing that plan come into fruition, as the company finalizes the split on Sunday. This move has drawn much criticism, most of which I am in agreement with. The biggest problem HP has at the moment is a lack of innovation. For a Silicon Valley company, lack of invention is the lack of a future. Instead of focusing on making better technology, Whitman is “running HP like a dying company”, in the words of hedge fund billionaire Jim Chanos. Chanos predicts that HP won’t be around in five to ten years.

It seems that HP has lost its way after the inventors stepped down. It used to be that having their hardware and PC businesses together was a way to streamline operations and be codependent. In their 2015 financial filing, HP stated that one of the big negatives of the separation would be the loss of interdependence, since “as part of HP Co., the enterprise technology infrastructure, software, services and financing businesses have historically benefitted from HP Co.’s larger size and purchasing power in procuring certain goods and services”.

For the past decade, HP has been focusing mainly on increasing operating efficiency and acquiring companies rather than working on a long-term growth strategy. In 2002, HP announced additional outsourcing for its PC manufacturing facilities. HP acquired Compaq Computer in 2001, Palm in 2010, and Autonomy in 2011. Each of these acquisitions were reactionary, made in response to some sort of emerging competitor or market, rather than being generated through strong vision. Buying Compaq was supposed to make HP more competitive against emerging Asian competitors. The advent of mobile and cloud computing hit HP like a truck, spurring it to acquire Palm. Autonomy was a bet on enterprise software like Oracle and Salesforce.com. Each of these moves led to layoffs and short-term profitability, but nothing more.

-Yutong Zhou