HP Inc shares outpace those of HPE in first trades since split
As HP splits, Meg Whitman seeks reinvention.
Former Hewlett-Packard chief executive Carly Fiorina has repeatedly said that her time spent running a huge company makes her a viable candidate to run the nation.PALO ALTO, CALIFORNIA: When Meg Whitman, Hewlett-Packard’s chief executive, was preparing to cleave her company in two, she feared reliving a shoe disaster from early in her career. Whitman was an executive in charge of the Keds brand at Stride Rite a few decades ago as the company was making a transition to a new “high-tech” warehouse. The server, storage, networking, services, software, and cloud businesses will live under the HP Enterprise umbrella with Meg Whitman—who led legacy HP—as president and CEO.
The two executives have many similarities: Whitman ran as the Republican candidate for governor of California in 2010, losing to current governor Jerry Brown. Whitman worried so much about a similar hiccup that during planning meetings for the HP breakup, “Can we ship Keds?” became a sort of shorthand for worrying about bungling. When HP splits in two Sunday after a year of planning, what is left will bear little resemblance to the engineering-driven company founded more than 75 years ago in a garage not far from Stanford University.
Fortune‘s Barb Darrow summarized the company’s struggles this way: Exactly when things went off the rails is subject to debate, but many point to the controversial acquisition of Compaq Computer in 2001 by HP’s then-CEO Carly Fiorina as the start of the decline. Since then, the company’s had to weather such self-inflicted wounds as a pretexting scandal in which a board member, an executive and HP-paid investigators faced criminal charges for spying on journalists; the $1 billion acquisition of Palm Computing in 2010 to beef up HP’s mobile capabilities; then the sale of Palm’s intellectual property. The other, Hewlett Packard Enterprise, or HPE, will sell the computer servers, data storage, networking, software and consulting services that run a modern company.
There was also the ill-fated purchase of computer services giant EDS in 2008 and HP’s $11 billion bet on software company Autonomy, not to mention the dismal year-long tenure of Leo Apotheker. Whitman is now managing HP’s tricky ransition from one gigantic, but struggling, technology giant into two public companies, HP Enterprise HPE and HP Inc., which were born Monday. The question is whether Wall Street believes the two companies will benefit from the separation. “Anytime you make a change, you make a claim,” said Toni Sacconaghi, an analyst with Sanford C Bernstein. “They say, ‘We’re on the front edge, everyone will have to catch up to us.’ But both new companies aren’t that wildly different. HP, the less technically ambitious of the two new companies, will largely occupy the building that used to house HP’s famed research and development division. The offices of William Hewlett and David Packard, kept intact after they left more than 20 years ago, are being sealed off with a separate entrance so that employees of both companies can come by for visits.
Since October 6, 2014, the day Whitman announced the split, a 500-person team inside HP has done more than 300,000 tests of its systems to see if they work right, built 75,000 new ways to interface with its computers and cloned 2,800 applications to use in one company or another. This kind of big technology upgrading will be attractive to the information technology, or IT, departments at companies going through change, said Scott Spradley, who led the team. “Most people think IT knows when its servers are going to go down, but the reality is, they mostly rely on manual tickets,” he said. “We automated everything.” As transformational as Whitman’s message sounds, around HP it is also familiar. Carly Fiorina, now a Republican presidential candidate, wanted customers to learn from the way HP consolidated operations after it bought Compaq for about $25 billion in 2002. Like Whitman, Fiorina and Hurd both took over HP with little previous experience of HP and had built careers largely on their skills in sales and marketing.
This is another thing that has to change, said Whitman, who for years ran the auction site eBay. “This is crazy — Carly, Mark, Leo, me — the learning curve is too steep, the technology is too complex for an outsider to have to learn it all.” One year into the job, Whitman gave a devastating report on the company’s health, sending the stock sharply lower before it gradually recovered. And one year ago, she concluded that HP needed radical change. “She had in strategic folks from Goldman Sachs and McKinsey,” said Chris Hsu, HPE’s chief operating officer.
His financially oriented metrics have become common standards among Whitman’s top executives, who had used a wide variety of measurements to gauge the performance of their business units.
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