Business | Hewlett-Packard

Growing old, but not together

HP’s break-up will not solve all its problems

|SAN FRANCISCO

FOUNDED by two tech guys in a garage in Palo Alto in 1939, the giant created by Bill Hewlett and Dave Packard is remembered as Silicon Valley’s original startup. In its heyday, its flair for innovation was unrivalled, and it devised technologies that shaped people’s work and personal lives, from calculators to cameras to computers. Today it is regarded as a has-been: a reminder of Silicon Valley’s past but not a beacon of its future.

Meg Whitman, HP’s boss, knows her firm needs a reset. On November 2nd it began trading as two separate companies on the New York Stock Exchange. The split creates a seller of printers and computers, called HP Inc, and a purveyor of information-technology services to businesses, called HP Enterprise. The latter is thought to have brighter long-term prospects, and that is the one that Ms Whitman will run, while HP Inc will be overseen by Dion Weisler, who previously led the firm’s printer and personal-computer division in Asia. The two HPs will be behemoths, each with around $50 billion in annual revenue. “We have scale that startups could only dream about,” says Ms Whitman.

Senior executives in each company will have the benefit of running a more focused operation; and shareholders will be able to choose how much exposure they have to each of the two lines of business. But neither of the two daughter firms has an easy road ahead. HP Inc must try to grow while global sales of personal computers and printers are modestly declining, as people make more use of smartphones and tablets. HP Enterprise’s business clients are shifting their computing power and storage to the online cloud, an area in which it has less expertise and faces stiff competition. Having tarnished its own reputation with ill-advised takeovers of Compaq, a computer-maker, and Autonomy, a software firm, HP may now, by dividing itself into two more digestible bits, make them into bid targets.

And separation may not solve HP’s biggest problem: a perceived lack of innovation, which discourages top talent from working there, thereby making it harder to innovate. Ms Whitman points out that Steve Jobs, Apple’s late boss, chose to do a summer internship at HP. But today’s engineers and aspiring entrepreneurs prefer to work at nimble startups where their ideas are more likely to be listened to, and the share price has more room to grow. HP Enterprise alone employs around 250,000 employees (although it plans to trim jobs). In contrast, Apple, Google and Facebook together employ around 160,000. “I don’t think anyone comes out of college saying, ‘I want to go work at HP,’” says Ali Behnam of Riviera Partners, a recruiting firm.

Splitting HP in two seems unlikely to change its image problem. It seems almost inevitable—with Apple as perhaps the most striking exception—that yesterday’s cool young startups eventually become today’s stodgy, greying corporations. A similar fate has befallen Microsoft and Cisco and may some day await Google and Facebook. At least, unlike so many startups that vanish without trace, HP has survived for 76 years.

This article appeared in the Business section of the print edition under the headline "Growing old, but not together"

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