News broke over the weekend from one of the computer and printing giants, Hewlett- Packard, that it will soon separate into two publicly traded companies.
Current CEO Meg Whitman confirmed it last Monday saying that dividing the company in two will make both halves more agile thereby much stronger. Moreover, it also validates its strategy to cut an additional 5,000 jobs, in addition to the 45,000 to 50,000 posts reduction that has been previously-announced. The money that will be saved from the reduced headcount will be utilized for research and development.
One company is to be named Hewlett-Packard Enterprise, which will focus on cloud computing services among other tools for business. It will be led by Whitman, who joined the company in 2011. The second company is to be called HP Inc., which will handle personal computers and printers, to be headed by Dion Weisler, HP's current Executive Vice President for their printing and personal systems business. Once the split is finalized, current HP shareholders will have shares of both companies, with the company noting a tax-free transaction for federal income tax purposes.
HP is forecasting a full-year non-GAAP earnings per share between $3.83 and $4.03. for fiscal year 2015. Furthermore, it remains optimistic saying that it expects to report a non-GAAP earnings between $3.70 and $3.74. " HP's balance sheet is in the strongest shape it has been in the past several years with cash greater than debt, PC margins ate very stable, and services margins are improving," Citi analyst Jim Cuva wrote in his research note last Monday.
The company has considered the split back in 2011, but Whitman was not yet convinced the plan will work, thinking that the 2 big departments sustained each other. This year is a different story, as she took on the belief that the more agile a a company is, the stronger it will be.
