Must-know: Is the spinoff part of HP’s restructuring strategy?

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HPQ’s strategy

Meg Whitman is HP’s (HPQ) current CEO. She became the CEO in 2011. She initiated a five-year turnaround plan for HP. The plan addressed the changing requirements of enterprises or clients. It focused on new growth areas and products. It intended to revive HP’s glory days.

As a part of the split, existing shareholders will be given shares for the two entities in a tax-free method.

Any positive news about the company will likely benefit the SPDR MFS Systematic Value Equity ETF (SYV), the SPDR MS Technology (MTK), and the SPDR MFS Systematic Core Equity ETF (SYE).

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growth areas
As the above chart shows, the plan focuses on simplifying HP’s organizational structure. HP’s CEO explained that HP’s division into two companies “will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics.”

Size of the two companies

The two entities—HP Enterprise and HP Inc.—are roughly the same in size. They also have similar profitability. HP’s enterprise market has growth issues. The PC market hasn’t shown much improvement. This is due to end of Microsoft (MSFT) Windows XP.

More layoffs

In addition to the announcement of the company’s breakup, HP also announced that it would be laying off 5,000 employees. The layoffs are related to the restructuring plan. The total number of layoffs expected now is 55,000—compared to the previous estimate of 45,000–50,000 layoffs. Management mentioned that the savings from the layoffs will be put into sales and research and development.

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