Enterprise majors focus on the split

HP and Symantec have both announced plans to split their businesses in two, in order to be better focused and more agile

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Enterprise majors focus on the split Shedding the PC and printer business from HP is part of the company’s ongoing turnaround plan, says Whitman. (Getty Images)
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By  Mark Sutton Published  November 23, 2014

Speaking to ITP during GITEX, Darren Thomson, EMEA vice president and head of marketing at Symantec, said that because storage and security are often two different functions within the customer organisation, Symantec had been having separate conversations with different buyers already, so the split would allow them to focus more on each part rather than trying to integrate the offering.

“The reality of trying to run those two businesses in an integrated fashion is that you essentially dilute the focus, energy, resources, money, etc. of your engineering division by, in some cases, obsessing over the integration points,” Thomson said.

He added that the company would still need “aggressive innovation” and to make “more acquisitions”. He also said that local reaction from partners and customers was positive, as both the channel and customers were usually dealing with the company as separate business lines: “They’re saying thank goodness, at least you’re going to be easier to do business with.”

HP makes the cut
Just three days before the Symantec announcement, HP revealed the split of its operations into two separate companies, with one enterprise-focused business, and one operation covering PCs and printers. HP’s enterprise hardware, software and services businesses will be known as Hewlett-Packard Enterprise, while the PC and printing businesses, will be called HP Inc. Meg Whitman will be President and CEO of Hewlett-Packard Enterprise, while Dion Weisler will be President and Chief Executive Officer of HP Inc.

The move was not much of a surprise, given HP’s struggles in recent years, which have seen around 50,000 jobs cut over the past three years as part of a restructuring and turnaround plan. Whitman said that the turnaround plan had strengthened HP’s core businesses to the point where it can more aggressively go after opportunities, enabling the split, which should be complete by the end of October next year.

“The decision to separate into two market-leading companies underscores our commitment to the turnaround plan,” said Whitman. “It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders. In short, by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders.”

Both parts of the new HP, will need to show innovation, analysts said.

Patrick Moorhead of Moor Insights and Strategy questioned if the PC and printer business would have the financial weight to be able to invest in innovation and increasing the range of its consumer products, particularly in making a compelling mobile offering, to compete in the tough consumer space.

Cantor Fitzgerald analyst Brian White suggested the split might clear the way for HP to acquire EMC, a move which was rumoured to be in discussion.

“If HP and EMC are in discussions to merge, as suggested by recent media reports, we believe it would be difficult for EMC shareholders to accept a PC and printer business,” White said.

Chrystelle Labesque, personal computing research manager at IDC EMEA, said the move will have a limited immediate impact on EMEA customers, despite the vendor being the largest IT supplier in the region. However, Labesque did warn that, in the medium term, HP staff may end up being distracted as the logistics of splitting the two companies begin to take their toll.

“We believe that the immediate impact of the announcement from a business strategy perspective in the region and in the countries in EMEA will be limited, as the different HP divisions already operate on compartmentalised paths both regionally and in the country,” she said.

“But in the mid-term it would be expected that logistically the two companies will have to be hosted in different office facilities, with separate back-end IT systems. Such practical steps do take time and can distract staff from day-to-day duties.”

According to Giorgio Nebuloni, data centre research manager at IDC, HP Inc. is depicted as a stable business with predictable returns and an organic growth pace. However, IDC expects Hewlett-Packard Enterprise to go through more radical changes as it moves towards the research house’s third platform vision. While this may be a dramatic change, he said that the enterprise side should come out stronger.

“Hewlett-Packard Enterprise will see ‘targeted merger and acquisition activity’. In other words, the enterprise side is the one where IDC expects to see more radical changes and bets on in the future,” he said.

“Overall, and despite the trends over the past nine months, we believe the underlying assumption is that HP Inc. is poised to face headwinds in the longer term, while the enterprise part can be boosted by significant growth with the correct investments.”

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