HP splits into two companies

Hewlett-Packard Co. has split its company into two — a measurement company and a computing and imaging company — and one analyst sees this move as an admission of the defeat of its former structure.

“It is a pretty substantial failure when you say, ‘Well, the strategy we’ve been talking about for three years is not working, and it’s not working to the degree that we have to split up our whole company to fix it,'” said Jonathan Eunice,

analyst at Illuminata Inc. in Nashua, N.H.

Eunice said HP has been growing, but its growth rate has been much smaller than expected for the past year or so.

He sees that as the reason for the shake-up.

Paul Tsaparis, president and CEO of Hewlett-Packard (Canada) Ltd., explained the decision was made “to enhance the earnings and growth potential of both companies. It’s really an opportunity for us to sharpen our strategic focuses of the two businesses, which are indeed quite separate and distinct, when you get down to it.”

He added that HP has found over time there isn’t much leverage between the measurement businesses and the computing and imaging businesses.

“In fact, with international standards that are evolving, especially around networking protocols and standards in that area, it’s really become more of a plug-and-play world. You don’t need to have the same technologies under the same roof, because standards are driving what in the old days used to be interconnectivity standards,” he said.

The new measurement company, which will have a new name within the next few months, will focus on communications and life sciences in markets such as medical products and chemical analysis. Its products and services are used to design, build and manage communications networks, including the Internet. It also focuses on fibre-optic, wireless and optoelectronics components.

The name change of the measurement company is one of the only big changes customers will have to get used to, according to Tsparis. In essence, both sides of the company will run basically the same as before the split as far as customers are concerned, he said.

The computing and imaging company will focus on computer, printer and information-services markets, and will include the inkjet products division, the laserjet solutions division, personal systems division and enterprise computing solutions division. It will keep the name Hewlett-Packard.

One week after the restructuring was announced, HP also announced the creation of a new Internet Business Unit to create Internet software, solutions, appliances and “e-services.”

E-services is the name of HP’s new strategy which is going to play a major role in the future of the HP computing and imaging company.

“We believe e-services is going to have tremendous impact for the network — both for the network equipment providers and the folks that are in the network management business,” Tsaparis said.

He described it as the next chapter in Internet development.

“We think the next generation of e-services is rather than you doing work on the Web, the Web doing work for you,” he said.

He described a scenario to illustrate his point. He said if you are going on a trip and you use the Internet to book a hotel room, book a car rental, book theatre tickets and make dinner reservations, you have to do all those things separately at different Web sites. If your flight gets delayed, “wouldn’t it be great if all those transactions you just made could communicate to each other and say that something has changed, so you don’t have to go back in and update all the records for each one of the files that is there?” he asked. He said that type of situation would be covered by what HP is referring to as e-services.

Tsaparis said it was not simply coincidental the two announcements happened so close together.

“The fact that we announced the e-services strategy so close to the announcement of the separation of the company is really a demonstration of the aggressiveness and the commitment HP is putting into what we call this Internet Chapter 2 of this next generation of e-services,” he said.

Eunice said while this is all a fairly bold move, he thinks HP needs to be bolder still. He had several ideas for how it could do this, including capitalizing on HP’s strength in printers, faxes and other office supplies to create interesting new integrated office appliances. He also said on the measurement side, there is an opportunity for HP to go far with its wireless networking capabilities if it chooses to do so.

And while he said he has a great deal of respect for HP’s president and CEO Lewis Platt, maybe the new leadership brought in during the realignment of the companies could bring the boldness needed to revive HP.

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