Embattled computer manufacturer Hewlett-Packard confirmed Monday that it will split into two separate and publicly traded companies, eliminating 5,000 jobs in the process.
The move breaks up the computer technology giant created after HP’s controversial merger with Compaq in 2002, offering a chance for vindication to critics of the deal.
Carly Fiorina, CEO of HP at the time, was the one who aggressively pushed for the Compaq merger in a brutal public shareholder battle that pitted her against the families of the company’s founders.
“In addition to the clear strategic benefits of combining two highly complementary organizations and product families, we can create substantial shareowner value through significant cost structure improvements and access to new growth opportunities,” Fiorina said in proposing the merger in 2001. “At a particularly challenging time for the IT industry, this combination vaults us into a leadership role with customers and partners — together we will shape the industry for years to come.”
She pledged, “We have done comprehensive integration planning and have clear metrics to drive our success. We are committed to achieving the synergies we have identified while maintaining our competitive position and momentum in the marketplace.”
Three years after the merger, Fiorina was ousted — and HP has been picking up the pieces ever since.
After Fiorina’s departure, HP has entertained a revolving door of CEOs, the latest of whom is former eBay executive Meg Whitman. With sales continuing to struggle, Whitman was the driving force behind the decision unlock value trapped in a large and unwieldy HP by splitting it into two more flexible companies, HP Inc. and Hewlett-Packard Enterprise.
The restructuring of HP vindicates many critics of the merger, including Walter B. Hewlett, son of one of the company’s founders, who called the HP’s investment in Compaq “disastrous” in a letter to stockholders during the merger battle. Michael Dell famously branded the merger as the “dumbest deal of the decade” and technology analyst Roger Kay wrote, “Dell must be totally gleeful, because these guys are going to spend all their time untangling themselves.”
While Dell has had its own problems lately and made the decision to go private late last year, Kay’s prediction seems to be the logic behind HP’s plan to downsize. HP has been burdened by the weight of its PC division for years and actually considered breaking up the company once before in 2011. HP realized that it had to be “nimble” and ready to adapt to the constantly changing technology market. It couldn’t do that with the corporate structure it employed. Time will tell if this measure will be enough to save the Hewlett-Packard brand. But maybe the company that said it was “better together” needs some time apart.
