By Robert McMillan
Hewlett-Packard Co. on Wednesday filed paperwork with the
Securities Exchange Commission, taking an important step toward the
tech giant's breakup on Nov. 1.
The Form 10 document outlines the balance sheet, based on the
past performance of H-P's Enterprise Group, of a new corporate
technology company called Hewlett Packard Enterprise Co. That
entity had revenue of about $55 billion and total assets of $65
billion in the fiscal year ended in October, according to the
document.
Hewlett-Packard said Wednesday that the second company resulting
from the split, HP Inc., isn't required to file a similar
disclosure document because it is considered the parent company. HP
Inc., which plans to sell PCs and printers, will issue its
financials at some point before the November separation.
Hewlett-Packard CEO Meg Whitman's decision to divide in two
arose from the company's struggles through much of the past decade
with declining revenue, corporate scandals and management changes.
H-P stood on the sidelines as companies such as Amazon.com Inc. and
Apple Inc. created compelling cloud computing, smartphone and
tablet businesses. In the end, H-P's size worked against it, Ms.
Whitman said in an interview last week.
"We needed to be smaller, more nimble, we needed to be more
focused," she said. "And we needed to have a capital structure for
each company that would allow them to pursue their objectives."
Between now and the November deadline, H-P will divide a
300,000-employee company that spans 170 countries and 600
locations. The work began last fall, shepherded by a 500-person
Separation Management Office charged with creating the new
corporate entities, bank accounts and computer systems that will
make up the new companies.
The executive leading this $1.8 billion effort, Bill Veghte,
announced his departure from H-P on Tuesday, an unexpected hiccup
in what, so far, had been a smooth process.
Ms. Whitman will be CEO of the new Hewlett Packard Enterprise
company, while Dion Weisler, who heads HP's PC and printer
business, will run HP Inc.
HP Inc. will focus on returning cash to shareholders while
expanding into new markets such as 3-D printing, Ms. Whitman said.
Hewlett Packard Enterprise, by contrast, will concentrate on growth
as it tries to stay relevant in a corporate computing market that
is being transformed by the cloud.
That means buying new companies, Ms. Whitman has said.
"Acquisitions have got to be a part of the future of Hewlett
Packard Enterprise," she said. "This market's moving too fast."
Some industry analysts believe that H-P's server, storage and
networking businesses have better long-term prospects than its PC
and printer groups. Moreover, the split also could revive talks
between Ms. Whitman and executives at EMC Corp., said Jim Osman,
CEO of Edge Consulting Group, an equity research firm that
specializes in spinoffs. H-P and EMC held off-and-on merger talks
last year. The discussions broke down just weeks before H-P
announced its spinoff plan, The Wall Street Journal has
reported.
H-P already was in the midst of exploring a breakup when Ms.
Whitman took charge of the company in late 2011. At the time, she
said H-P made more sense as a single entity than apart.
But the 2011 split was different from the one described in
Wednesday's SEC documents. In 2011, H-P considered spinning off
only its unprofitable PC business, much as IBM Corp. had done in
2004.
Rolling the highly profitable printer business into the new HP
Inc. creates a spinoff company that is more likely to return cash
to shareholders, Ms. Whitman said. The current breakup will cost as
much as $450 million in "dis-synergies," H-P has reported--extra
costs incurred by duplicating internal functions such as legal and
human resources and creating new product brands.
The PC-only carve-out proposal would have cost even more, Ms.
Whitman said. "There was a big dis-synergy of about $1 billion
around building an entirely new brand for the PC business," she
said.
H-P and its board began investigating the possibility of a split
early last year, but it took Ms. Whitman several months to become
convinced it was the correct course.
"I was quite convinced that we should keep this company
together, really up until this past summer," she said. "What I
realized was, this market is changing at lightning speed. I've been
in the technology business a long time. I've never seen markets
move as fast as this."
Write to Robert McMillan at Robert.Mcmillan@wsj.com
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