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HP split could lead to increased telco focus

HP business split could see greater emphasis on telco solutions

Technology giant Hewlett-Packard is reportedly close to dividing into two separate companies, with an official announcement thought to be in the offing. The split is likely to produce companies focusing on PCs and printers, and corporate computing, respectively.

According to Re-code, the move comes after failed attempts by HP to sell off various business arms it deemed to no longer be core to the company’s future business strategy. This includes the rebuffed $32 billion sale of its PC unit by both Lenovo and Dell, as well as the failed sale of its $28 billion IT services unit, known as Enterprise Services.

In recent years, HP has attempted acquisition-based growth within the enterprise business services arm. Acquisitions of IT services firm Electronic Data Systems (EDS), network infrastructure provider 3Com, data management firm 3PAR, and mobile handset and PDA vendor Palm, have all indicated a concerted effort by HP to diversify revenue streams, despite some heavy losses being taken around the acquisition of the latter.

More recently, HP announced the formation of its Network Functions Virtualization (NFV) business, a unit focused on delivering an integrated NFV solution through the unification of various HP units, including Enterprise Services, Software and Cloud. As a part of the concerted effort to capitalise on the NFV revolution, HP installed industry veteran Bethany Mayer as the general manager of the business unit. However, within 8 months, Mayer had been poached by Ixia to become its new President, CEO and board member.

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In June, however, HP brought in Verizon’s Director of Network Architecture, and former chair of the ETSI NFV ISG, Prodip Sen, as its new CTO of the NFV business unit. The capture of Sen as its technology strategy lead could be seen as a strong endorsement for HP, considering his influential position within the industry.

The rumoured split of HP’s businesses will likely see more of a focus on its telco service offerings portfolio, particularly in the growth markets of Software Defined Networking (SDN) and NFV, which Analysys Mason forecasts to grow from $181 million today to $2.4 billion by 2018.  For now, the split may appear to be a concession from HP of the necessity to focus more on B2B services. For the telco space, it may further indicate the company’s desire to move into verticals with a potentially cash rich future.

UPDATE: 12:31– HP has since confirmed the news of the split, and has announced the names of the two new companies, and the structure of each. Hewlett-Packard Enterprise will focus on the development of  its servers, storage, networking, converged systems, services and software, and cloud solution platforms. HP Inc. will deliver personal systems and printing solutions.

“The decision to separate into two market-leading companies underscores our commitment to the turnaround plan,” said Meg Whitman, who is the Chairman, President and Chief Executive of HP. “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.” Shareholders seem to agree, with HPQ up over 5% in pre-marke trading at time of update.

The split is scheduled to be completed by the end of fiscal year 2015, being 31st October 2015. The full announcement from HP can be found here.

 

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