Hewlett-Packard, a long-time OEM of Microsoft, has decided to split into two separate entities in an attempt to reinvent itself. With PC sales steadily declining and a market where smartphones alone can generate billions of dollars in revenue, HP is forced to refocus its strategy in an effort to maintain relevance in today’s market. This comes after a lengthy 76 year run in the industry; but that doesn’t mean the Palo Alto based company (now Silicon Valley) should be written off completely.
The decision to split HP was made over a year ago, however, as of November 2nd, 2015 Hewlett-Packard has officially become HP Inc. (HP.com) and Hewlett-Packard Enterprise (HPE.com). HP Inc. will continue developing personal computers and printers while operating under the New York Stock Exchange title, HPQ. Hewlett-Packard Enterprise, which will go by HPE for stock purposes, will invest and develop Industrial grade server computers. These servers are used by other companies to host websites as well as process big data. HPE also supplies networking equipment along with its own suite of software and services.
So why did HP decide to split? The decline in PC sales over the past few years has put a strain on what HP considers its more viable business, Enterprise. By splitting into two companies, HPE can focus on more lucrative business ventures without feeling the stress of mediocre PC sales. During an interview with Re/code, Meg Whitman, the CEO of HP Enterprise, explained the benefits of splitting the company:
They are two smaller and nimbler companies in very different businesses from each other. But we’re also leaning into the next generation of new technologies and want to lead in those too.
The new technologies Whitman is referring to are cloud based services like those from Microsoft’s Azure, which supply software and services to companies while managing and maintaining all their server needs. This seems to be the option of choice for many smaller and newer companies and leaves HPE at a disadvantage as just last week the company announced it would shut down its own public cloud based service, Helion. Instead, the company will focus its efforts on providing businesses with virtual PC environments, allowing them to build their own IT solutions. Whitman goes on to say:
We decided that it no longer made sense to compete in the public cloud portion. Our strategy is to take an open, multi-cloud approach to the marketplace.
Even with this tremendous shift in strategy, the two companies will still have to battle on two separate fronts, albeit with two separate budgets. HP Inc. will have to continue to compete against the likes of other consumer PC OEMs like Dell, Lenovo, ASUS, and even Microsoft, while HPE will compete with Dell’s enterprise division and other companies like EMC.
Either way, HP Inc. and HPE face many challenges in the current market whether they face them separating or together. The split does give each company the ability to make swifter, more strategic changes than before, but will it be enough to help the company survive another 76 years? Only time will tell. Let us know what you think about HP’s future in the comments below.