HP Splits: No Longer "Stronger Together"

by David Krebs | 10/07/2014

A move initially suggested by ousted CEO Leo Apotheker and previously shunned by now CEO Meg Whitman came to light when on Monday HP officially announced it was splitting into two companies: HP Enterprise and HP Inc. (Note, Apotheker suggested an outright sale of the PC/Printer business). This is not to suggest that Meg is following Leo's blueprint but rather that this was not her original plan. Clearly over the past three years through targeted - and often deep - RIFs and internal reorganization, the 2014 HP has Meg's fingerprints all over it. Moreover, from a financial perspective the company is in a significantly better position having paid down debt and increased its cash reserves. Wall Street responded favorably to the move with shares up almost 5% on Monday. Part of the sales pitch was that while three years ago HP was too weak financially to absorb such a split today it is and today technology company's need to be more nimble to succeed. 

So does this favor HP's enterprise mobility vision? Although it recently ceded its number one position to Lenovo, HP is still the second largest supplier of PCs with strong enterprise ties. However, the (Windows) PC business spells trouble, even with the recent Windows XP EOL boost. HP's operating profit margin on PCs are only worsening with little reprieve in sight. In addition, HP's overtures into the broader mobile market have been anything but seamless. Gone are the days of the iconic iPaq and HP's failed acquisition of Palm does not need retelling. However, over the past several years, HP has honed its enterprise mobility capabilities, especially through its professional services and software offerings. HP has been expanding its mobile services, anchored by its Enterprise Cloud Services (ECS) - Mobility offering that provides a cloud-based mobile management platform. Sector specific capabilities, such as HP's FedRAMP authorized cloud for US Public Sector clients, further differentiate its portfolio. 

From an enterprise mobility perspective, the hope is that this move permits HP to focus more strategically and act more efficiently. While HP's mobile solutions portfolio is rich - spanning mobile managed services, application development and testing and security solutions - it often seems a step or two behind and more of a reactive participant. HP has a strong and loyal user base, great brand recognition and generates the cash flow necessary to aggressively invest in R&D and/or M&A. Where has and can continue to innovate and deliver value will be around professional services and especially custom (mobile) software development. It is here where we see the opportunity for HP to really make its name in enterprise mobility.