Hewlett-Packard’s statement that it is considering the sale of some unnamed units has undoubtedly made employees queasy. You could chock up the notion of divestiture to the rumor mill if it wasn’t for the fact that HP’s statement appeared in a December filing with the SEC.
Before filing its 10-K on December 27, HP insisted it spin-offs weren’t on the table. In early December, a spokesman assured Bloomberg that it was “committed to keeping our businesses and assets together.” But in the 10-K, the company said it was continuing to “evaluate the potential disposition of assets and businesses that may no longer help us meet our objectives.”
In the midst of a multi-year turnaround plan, the company ended its 2012 fiscal year with 331,800 employees worldwide, 17,800 fewer than in fiscal 2011. It’s not clear how many of those jobs were cut as part of its announced plans to shed the to shed 29,000 positions over the next two years.
So the question remains: Which units are in danger? Two of the most often mentioned are HP’s PC division and its EDS unit, which the company acquired in 2008.
Before he was dismissed former CEO Leo Apotheker was actively working to spin off the PC business, but successor Meg Whitman combined it with the imaging and printing unit to form the Personal Systems Group. Although the group accounts for about half the company’s revenue and employs about half the company’s workers, the reorganization reportedly had nervous employees checking out other job options. The fact that the declining PC Market pushed the business’s fourth-quarter revenue down 14 percent year-over-year didn’t help matters.
UBS analyst Steve Milunovich, who has repeatedly called for the PC group’s spinoff, said in a research report that such a move is unlikely over the next 12 to 18 months because of the company’s high level of debt.
As for EDS, in September CRN reported that HP was putting out feelers to private equity firms to gauge their interest in the unit HP denied the story. Either way, the $13.9 billion acquisition of EDS nearly doubled HP’s headcount, though since then the unit has seen massive layoffs and was pegged to lose another 10,000 to 15,000 jobs in the latest round downsizing. EDS is a part of the company’s services unit, whose fourth-quarter revenues were down an overall 6 percent year over year.
Whitman is focusing the company on corporate clients with an emphasis on the cloud, security and information analytics. That has tech analyst Rob Enderle believing HP won’t touch enterprise systems, software or services. “They’re a much better match for what Oracle and IBM are doing, which appears closer to the company’s current focus,” Enderle says. He estimates services and hardware to be HP’s second- and third-largest units after printing.
Software, especially, has been a bright spot for the company, with revenues up 14 percent, to $1.2 billion, in 2012. In terms of jobs, though, it’s one of HP’s smallest groups with around 16,000 workers.
To support its high-priority Converged Cloud strategy, HP consolidated disparate internal units. In September, HP Cloud Services added 125 positions in a move to build its offering on top of OpenStack. As for the company’s troubled and controversial Autonomy unit, some observers, like IDC’s Crawford Del Prete, believe it’s a central asset to HP’s analytics strategy and won’t be sold.
Del Prete, IDC’s executive vice president of worldwide research, believes selling off pieces of the business are more likely than divesting entire divisions. More likely to go, he says, are the digital photo-printing website Snapfish and Gram, the renamed remnant of webOS. Each has fewer than 500 workers.
“I don’t think PCs will be the first place they will look to divest,” Del Prete says. “They might be looking at the high-end part of the server business, some under-performing units of the storage division, like tape drives, or they may decide that it doesn’t make sense for them to stay in the low-end printer part of the business.”
“While selling off whole divisions might still be on the table,” he adds, “it could mean that they end up selling pieces, which might not affect a significant number of jobs in any one area.”