06 Oct Investors love HP breakup, but analysts see a failed strategy
Investors loved HP CEO Meg Whitman’s decision to split Silicon Valley icon HP into two different companies. In trading on the stock market, HP’s share price rose 6 percent on Monday after the company made the announcement.
But analysts say that, whatever blip comes from short-term trading, HP’s move to break itself up comes from a failed market strategy. HP said it would divide itself into HP Inc., consisting of the PC and printer businesses, and Hewlett-Packard Enterprise, which has the enterprise and services divisions. The company is also laying off an additional 5,000 employees, bringing total layoffs to 55,000. But Wall Street often loves bad news, and in this case, analysts believe that the stock price bump that comes from the announcement may be short lived.
Roger McNamee, managing director at Elevation Partners, had harsh words for HP and Whitman.
“HP has gone from having two boat anchors tied together, each trying to float in the water, to two separate boat anchors trying to float in the waters,” McNamee told CNBC today. “They have all the agility of a bag of cement.”
McNamee said HP is two or three years behind every trend, and he said IBM made the right move years ago when it spun out its PC and server business as Lenovo.
“The only thing I’m certain about on this deal is that the executive compensation will be absolutely terrific,” McNamee said.
McNamee also said, “In fairness, i think HP has been horribly managed for 20 years. Meg Whitman didn’t inherit a great situation. But I don’t think there is any evidence she has gotten control over it….The long-term outlook for both sides’ business is terrible.”