Hewlett-Packard: Better Broken Up?

If certain analysts had their way, Hewlett-Packard would end up as multiple companies, each focused on a different technology segment.

Analyst Steven Milunovich of UBS initiated coverage of Hewlett-Packard on Wednesday with a splash, arguing that the company could better unlock value by spinning off a portion of the business, specifically printers and PCs. The “core” HP would apparently remain as an enterprise services business, competing with IBM and EMC in the servers, software, storage and solutions space.

If this sounds familiar, of course, it should: that was the argument made by then-CEO Leo Apotheker during his brief tenure. Last September, current chief executive (and former eBay CEO) Meg Whitman was brought in to reverse course, and announced that HP would hold onto its PC business.

“The challenge of ‘better together,’ as HP puts it, has multiple facets that might favor being ‘smart apart,’” Milunovich wrote in the report. (“Better together” has been Whitman’s slogan for the unified HP business.)

Under the current structure, HP’s printer and PC businesses are under the control of Tom Bradley, once thought to be the natural choice to lead a printer/PC spinoff. The central arguments for such a spinoff—that PCs are a low-margin business, and might flourish with an optimized supply chain—remain valid. Milunovich also argued that printers are in a slow decline.

For her part, Whitman argues that the combined might of a server and PC business actually lowers costs via improved volume demand, and that servers, printers, and PC all are part of a unified product line. UBS obviously disagrees.

“HP is surrounded, being attacked in enterprise computing by focused goliaths like IBM and EMC and in end-user computing by Apple, Lenovo, and Samsung,” Milunovich added.

UBS claims it’s believed that HP should break itself up for more than seven years. The firm has begun beating the drum again with a “Sell” rating on HP stock, which is down about 28 percent this year.

For a large corporate customer like Boeing, buying a unified package of PCs, servers, and software solutions might make sense. But for a data center operator, whose PC needs are minimal, a broken-up HP might focus the resulting companies and assets more on the needs of enterprise customers.

Meanwhile, HP has taken its own steps toward reshuffling, announcing organizational changes within its enterprise business.

On Aug. 8, HP announced that it has appointed Mike Nefkens, currently senior vice president and general manager of HP Enterprise Services EMEA, to lead HP ES on an acting basis. John Visentin, who previously ran HP ES, will be leaving the company to pursue other interests. HP also announced that Jean-Jacques (JJ) Charhon, senior vice president and chief financial officer of HP ES, had been appointed chief operating officer for HP ES; he will focus on increasing customer satisfaction and improving service delivery efficiency, which will help drive profitable growth.

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