Hewlett-Packard Co., the multinational information technology giant providing hardware, software and services, has decided to split its world over business into two entities - PC-and-Printer and software and related services.
The upcoming breakup will cost HP billions of dollars, according to a media report.
The Silicon Valley institution will formally divide into two public companies by November 1 - PC-and-printer Company and Hewlett-Packard Enterprise with the later selling business software, servers and networking gear.
H-P said it would spend $1.8 billion in restructuring and a further $950 million in taxes to accomplish the split, Wall Street Journal reported.
H-P said it would incur an additional one-time charge of $1 billion in connection with the separation and $2 billion in restructuring costs in its Enterprise Services group. Toni Sacconaghi, an analyst with Bernstein Research, said the latter expense most likely would result from reducing head count.
Acknowledging his view, Cathie Lesjak, H-P's chief financial officer said, "H-P would cut costs too. As a result of the separation, we think that there will be opportunities to find some cost savings."
The company has been struggling to boost its revenue in a sluggish PC market. It had reported a 7% drop in revenue for the quarter, hurt by a strong U.S. dollar and declines in all the company's major segments. It was the 14th decline, year-over-year, in the past 15 quarters.
H-P's PC group was hit harder than expected, with revenue down 5%. The software group was no healthier, down 8% year-over-year, as was enterprise services, down 16%.
The company will lay out the financial details of the two new H-Ps, both of which are due to rank as Fortune 50 companies. H-P is dividing up the company's staff of 300,000, real estate at 600 locations and a Gordian knot of 2,700 information-technology systems in 170 countries. It has assembled a team of several hundred employees to manage the massive task.
HP China sells stake to Tsinghua
Meanwhile, Hewlett-Packard has sold a majority stake in its China server and storage business to Tsinghua Holdings as they launched a joint venture that is expected to boost sales of HP enterprise hardware products in the country.
Tsinghua will buy 51 percent of the joint venture, called H3C, for US$2.3 billion. H3C will include HP's China-based server, storage and technology services assets, as well H3C Technologies, an HP networking equipment subsidiary in China.