Imagine you’re the head of a tech company. What’s your job? To innovate, creating unimagined ways for technology to make the world work a little better? Sure. That’s what my peers and I are trying to do every day.
Now imagine you’re the CEO of a multi billion-dollar tech company. Delivering innovative products and services is part of your job, but delivering financial success is what really matters, and that means keeping your shareholders giddy.
When Hewlett-Packard’s CEO Meg Whitman announced the company would split into two publicly-traded entities by the end of 2015, she stressed that each will be “a lot more nimble, a lot more focused” without the other. What she didn’t say was that the announcement would satisfy the company’s most demanding shareholders for something, anything, to boost the share price. The day it was announced, HP’s stock jumped as much as 6.6%. Nice work, Meg.
Currently in its third year of a five-year turnaround plan, HP will also lay off 5,000 employees. Hate to say it, but shareholders respond well to downsizings. Can’t blame them, it’s decisive action.
Now the real stuff begins. HP’s enterprise-facing software and services business, called HP Enterprise, will be run separately from the the consumer-facing printer and personal computer business, HP Inc. There is logic to this: HP Enterprise is in its springtime and needs its servers, software and cloud technology to be nurtured more patiently for potential high-growth. HP, on the other hand, is in its autumn and needs to have the profitability of its legacy computers and printers managed right away for stronger cash-flow while investing in 3-D printing.
Best of luck to both. Expect HP Enterprise, led by Meg Whitman, to make a few well-chosen acquisitions to become the IT solutions leader it deserves to be. And don’t be surprised if the computer and printer company is sold off to a consumer technology powerhouse like, say, Lenovo.
Oh yeah, eBay also announced it will split off its PayPal business. With $7 billion in revenues and growth at 20 per cent a year, the e-commerce leader could be worth $30 billion, roughly half the value of its parent. Just to keep it interesting, let’s recall that PayPal was acquired in 2002 for $1.5 billion by then-CEO Meg Whitman. Small world!
Most recently, antivirus software company Symantec also plans to run its cybersecurity and information-management businesses separately. By the end of 2015, Symantec will take on malicious hackers with Norton antivirus software as its moneymaker, and spin-off its information-storage business with Veritas software as its marquee product.
Three different companies, all deciding their distinct businesses should be run in their own unique ways. Is this a trend in focusing leadership on innovation, or appeasing shareholders? I know you have your opinion, and I’d love to hear it.