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CRN Exclusive: Whitman Says HP Split Frees Up Enterprise Company To Eye Acquisitions

HP's chief tells CRN the split lets the enterprise business pursue acquisitions furthering the "New Style of IT."

Hewlett-Packard CEO Meg Whitman told CRN Monday the company's split into two businesses paves the way for the new enterprise business to flex its acquisition muscle.

"Hewlett-Packard Enterprise will be better able and more quickly able to make acquisitions that further the new style of IT," said Whitman.

The split will create two public, Fortune 50 companies each with some $56 billion in sales. Hewlett-Packard Enterprise is set to include enterprise systems, software and services, while HP Inc. -- which will retain the current branding -- will include the company's personal systems and printing business.

[Related: HP Confirms Split Into Two Fortune 50 Companies: PC-Printer And Enterprise Business]

The split is expected to be completed by the end of HP's fiscal year 2015 ending Oct. 31, 2015 and will give HP shareholders stock in both HP Inc. and Hewlett Packard Enterprise

Whitman's comments came after HP informed Wall Street analysts Monday that the company is still dealing with material, non-public information that could indicate a potential acquisition is being discussed.

Whitman said the "financial architecture" of both Hewlett-Packard Enterprise and HP Inc. has been established so both entities are better suited to compete in their respective markets.

Hewlett-Packard Enterprise will have "a balance sheet that will be tilted toward more inorganic moves, more M&A," Whitman said, noting debt from that side of the business will come from HP's Financial Services unit which will be a formidable competitive weapon to win enterprise business.

"On the HP Inc. side, it will have a very strong balance sheet that will fund some M&A, but also a lot of inorganic innovation," she said.

As HP looks at M&A in the enterprise business, Whitman told Wall Street analysts that such a deal faces stringent shareholder returns criteria.

"I just can't underscore enough the notion of this returns-based shareholder value creation strategy that we have for M&A," Whitman said.

NEXT: HP Partners See Split Opening Door To HP Enterprise Buys


Solution providers said they see the split as a way to position Hewlett-Packard Enterprise for potential acquisitions.

"HP is obviously freeing themselves up to make a big bold statement and possibly an acquisition," said Jamie Shepard, regional and health systems senior vice president at Dallas-based national solution provider Lumenate, No. 122 on the CRN SP500. "They need to make an acquisition in the hyper-converged software defined data center area to stay relevant."

HP is playing catch up in the hyper-converged infrastructure market where rivals like Cisco and EMC are moving fast and Simplivity and Nutanix have emerged as fast growing companies, Shepard said.

"This frees things up so HP can get more involved with hyper-converged infrastructure and software defined," Shepard said. "This is where HP is lacking. They don't have a strategy there for hyper converged."

The move to split the company into two separate units comes two weeks after reports surfaced that HP had considered a spin-off of its personal systems group business as part of mega-merger discussions with EMC, which broke off some time ago. An HP-EMC merger would have created a computing behemoth with a $130 billion market capitalization.

Shepard said he does not expect a blockbuster acquisition like the HP-EMC deal, but further consolidation in the industry is inevitable. In fact, he said, in 25 years in the technology business he has never seen a more tumultous time.

"This is the most confusing time I have ever seen in this business because it is moving so fast, not just in one segment, but the entire industry," he said.

Bob Venero, CEO of Holbrook, N.Y.-based solution provider Future Tech Inc., No. 234 on the CRN SP500, said the split could unchain Hewlett-Packard's enterprise business to bolster their portfolio. "It may make a lot of sense for them to go after disruptive enterprise technology companies," he said.

Whitman, who will serve as CEO of Hewlett-Packard Enterprise and non-executive chairman of HP Inc. once the new entities are formed, said she sees the split ultimately making HP a better channel partner.

"After we get these companies separated, this will be better for partners," she said. "It will make both sides of the house more nimble and more flexible to bring the kind of innovation that partners need over the next couple of years, which are going to be tumultuous times for the partner community. So I actually think this makes us a better partner, more nimble, but not losing the relationships we have had over the last three years."

PUBLISHED OCT. 6, 2014

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