HP to split into 2 businesses

Printers, PCS to be separate from corporate services

Hewlett-Packard, one of the Bay Area’s oldest, most venerable tech firms, is splitting up.

The Palo Alto company plans to separate into two businesses — one that sells PCs and printers and another that sells products such as data center hardware and services for corporations, a person familiar with the matter, who spoke on condition of anonymity, confirmed Sunday to The Chronicle. HP is expected to make a formal announcement soon.

The move comes as legacy tech companies are being forced to spin off segments of their businesses to better compete with global rivals. HP is probably making a decision to simplify its operation and focus on the aspects it does best, analysts said.

“For a corporation to survive, it has to constantly change, and if it doesn’t change, it becomes obsolete,” said Rob Enderle with advisory services firm Enderle Group. “These firms are restructuring in what is a new reality, a reality that didn’t exist a few years ago.”

HP sells a wide range of products, from PCs to servers. By being so broad in its focus,

HP blocked itself from partnering with other companies because they have so many competitors, Enderle said. Rivals to HP include Cisco Systems and Lenovo.

Other pressures facing the company include higher demand for smartphones and lower demand for PCs. HP’s printer business also has not been as profitable as in the past, said Tim Bajarin, president of advisory firm Creative Strategies Inc.

“It does make sense from a fiscal standpoint to take a segment of their business that’s not strong and isolate its earnings potential,” Bajarin said.

The company declined to comment.

HP is a storied Bay Area company, founded by friends Bill Hewlett and David Packard in 1939. Hewlett and Packard developed an audio oscillator inside a Palo Alto garage, which has since been called the birthplace of Silicon Valley and was named a historic landmark.

By splitting into two compa- nies, HP is essentially moving half of its sales into a separate business. The company’s printing and personal systems group, which includes sales of products such as PCs and printers, generated roughly half of the company’s sales in fiscal 2013 at $55.9 billion.

HP is following the moves of other Bay Area companies that hope to become more successful by splitting apart. Last week, eBay said its electronics payments division PayPal would become an independent company. In 2013, PayPal made $6.6 billion in sales.

IBM also has separated aspects of its business, selling its PC division and x86 server business to Lenovo.

News of HP’s spin-off was first reported by the Wall Street Journal. HP’s current CEO, Meg Whitman, is expected to become CEO of the business that will focus on enterprise customers. Dion Weisler, HP’s executive vice president of printing and personal systems, will lead the business focused on PCs and printers, the Journal said.

HP has more than 300,000 employees worldwide. The separation into two companies will probably result in the hiring of workers in areas such as finance, accounting, maintenance and security, Enderle said.

Some analysts predicted that HP shareholders would react positively to the news of the split.

“Shareholders get excited about big changes,” Enderle said.