(Bloomberg) -- Hewlett-Packard Co. is well on its way to splitting into two separate companies around Nov. 1, Chief Executive Officer Meg Whitman told shareholders at the company’s annual meeting.
One of the companies will be named HP Enterprise and will focus on supplying businesses with software, services, and hardware, and be led by Whitman. The other, HP Inc., will sell personal computers and printers to businesses and consumers, and be run by Dion Weisler.
Hewlett-Packard, based in Palo Alto, California, and founded in a garage, was instrumental in making Silicon Valley a major technology hub. Now it’s breaking up to become more responsive to corporate customers. HP Inc. will trader under the stock symbol HPQ, while HP Enterprise’s ticker will be HPE, Whitman said.
Stock held by Hewlett-Packard shareholders will be converted into shares of both companies using a yet-to-be-disclosed ratio at the time of the separation, Whitman said. Initially, the company anticipates that the sum of the dividends paid by both stocks will equal the current dividend, with a higher proportion coming from HP Inc.
Post-split, Hewlett-Packard will divide buildings at its Palo Alto campus to serve as twin headquarters. “As we go around the world each location will be divided between HP Inc and HP Enterprise,” Whitman said.
Splitting the company will create two firms with radically different characteristics. This will require new company directors with “helpful domain expertise,” Whitman said. “Both boards will have continuity.”
Half of HP Inc’s performance will depend on the health of its personal-computer business, where sales have been under pressure for several years as consumers in emerging markets embrace mobile devices instead of PCs. The rest will depend on the continued health of the highly-profitable printer division, which faces its own risks as more paperwork becomes digitized.
HP Enterprise faces other challenges, as corporate customers move away from buying traditional hardware and software, and onto systems that let them rent or license software and hardware via the Internet, putting Hewlett-Packard into greater competition with specialized rivals such as Amazon.com Inc’s cloud division Amazon Web Services, Salesforce.com Inc and others. Though Hewlett-Packard has a cloud-computing product called Helion, it’s late to the market and faces an uphill battle in persuading customers to use its Internet-oriented systems.
Recent investments in research and development have given Hewlett-Packard the “strongest portfolio we’ve had in a decade,” Whitman said.
Last month, Hewlett-Packard’s Chief Financial Officer Cathie Lesjak said it would cost around $2 billion over two years to split the company, made up of $1.3 billion in charges for fiscal 2015, separation-related capital spending of around $300 million this year, and an estimated charge of $500 million for 2016. No further details on costs of the split were given at today’s meeting.
Hewlett-Packard began a restructuring program in 2012 with an aim to eliminate about 55,000 jobs. As of the last quarter, the company had completed 44,000 of those cuts and said it’s on track to complete the program by the end of fiscal 2015. There could be more reductions as part of the split, Lesjak said on the company’s latest earnings call.
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