When large companies act, they don't do it in a vacuum. So you'd have to assume that Hewlett-Packard (NYSE:HPQ) was planning something bigger than just a simple acquisition when it bought technology services specialist EDS last year. Now, the puzzle pieces are starting to fall into place.
The new HP
HP just created a whole new business unit out of fresh EDS services and a few old scraps. The new communications and media solutions (CMS) segment puts all of HP's products for media and telecom providers under one virtual roof. Unlike the former communications, media, and entertainment unit, CMS is a reportable segment that is expected to report operating earnings on its own.
"That which you measure is what you do," as HP spokeswoman Joy King told Telephony Online. "Service providers don't buy products today -- they buy solutions." So it makes sense to package HP's sprawling telecom and media assets under a recognizable umbrella, bolstered by EDS support services.
This move should make HP more nimble than top rivals IBM (NYSE:IBM) and Oracle (NASDAQ:ORCL), neither of which runs a separate business unit for this sort of media and communications software and services. Instead, both of them have a separate silo for software, and another one for service. HP is chopping itself up a different way, starting with this media unit.
This is a smart move. For one, it positions HP to play a larger role in the digital media revolution. If a vertically integrated solutions package helps HP win more contracts with service providers like Verizon (NYSE:VZ) or media giants of Time Warner's (NYSE:TWX) ilk, then HP gets not only a larger direct slice of the media pie, but also more buzz that should lead to even more contracts. The rich get richer.
The next HP
But that's not all. If HP is prepared to make sweeping organizational changes in the media segment, then what's to stop it from bundling up other departments with a new focus on customer markets rather than products? Nothing at all. For example, HP is big in the hotels and resorts industry, and already helps sector giants like Marriott (NYSE:MAR) and Carnival Cruise Lines (NYSE:CCL) optimize their operations. Why not break that out into a reportable segment, too, and focus on the hospitality field in a whole new way?
In the end, HP might be advised to split up into a handful of specialist companies. I'd love to pick and choose which parts of HP to invest in, so bring it on! In the meantime, shareholders should enjoy the sharper focus on measurable media goals.
Further Foolish speculation:
