HP’s Silicon Valley divorce was waiting to happen, but Whitman is taking a risk

 

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The Independent Online

Divorce is very much the fashion around Silicon Valley these days. You might, at this point, say that’s always been the case, what with the hours its denizens put in.

But it’s break-ups of the corporate variety that I’m referring to, as Hewlett Packard prepares to follow the likes of Ebay and Paypal by signing up for a split.

It was Meg Whitman who oversaw the marriage of the latter two. Having seen the reaction to the end of their union, and faced with a moribund market for her current employer’s shares, it’s little wonder she’s signalled the end of HP’s affair with the PC.

The market’s positive reaction suggests she’s on the right track but, then, a drowning man will clutch at straws. This is a company that has, in the words of one tech analyst I spoke to, presided over disappointment after disappointment.

Is the split going to change anything? HP’s marriage to the PC started badly, with its ill-fated merger with Compaq having to be rammed through by the then chief executive Carly Fiorina in the teeth of furious opposition from the company’s founding family.

It’s been a rocky ride ever since. In fact, the split nearly happened three years ago, only for Ms Whitman to nix the plans. Her investors might ask what’s changed.

Perhaps the fact that she sees a future in what remains after it’s been hived off. Ms Whitman has decided she wants to run the cloud, software and server business where the chances of her delivering something resembling growth are sunnier.

 

Growth that would be obscured were the operation left saddled to an under-performing PC business. Oh, it’s picked up a bit recently but with all the action in mobile computing, and struggling to keep up with main rivals Dell and Lenovo, it’s still firmly stuck in the slow lane.

Surprising, then, that Ms Whitman would choose to stay on as chairman of the PC business after the split.

The logic of the separation is that it will create two more focused businesses that the market will be better able to value based on their respective growth potential.

Ms Whitman has chosen the one she sees as the winning horse, and who could blame her? But for the deal to deliver the promised benefits, surely it would be best for her to devote all her focus on the part of the operation she plans to run.

Hewlett Packard has an unhappy history with its chairmen. Ralph Whitworth, the activist investor famous for pushing for break-ups (he loves this one, by the way) spent 16 months as interim chairman before stepping down, leaving the company scrambling to find another interim chairman.

It seems there is a dearth of candidates out there. Even so, by keeping a finger in both pies, Ms Whitman does rather run the risk of losing both if the split fails to make life happier for both parties.

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