Hewlett-Packard (NYSE:HPQ) is finally splitting itself into two separate businesses. Analysts and IT sector watchers have been waiting for this moment since 2012, so it's a welcome move in many ways. However, HP CEO Meg Whitman is handling the split in a very peculiar fashion.
At first glance, this looks like exactly the right kind of simple business spin-off. It's the simplification move that analysts have clamored for.
On one hand, we'll get Hewlett-Packard Enterprise, wielding a robust portfolio of high-margin business-class computing hardware and software.
On the other, the consumer-focused HP takes over HP's personal systems and printing operations. This one's a higher-volume business, but with somewhat lower profit margins.
When I considered this idea two years ago, the two-way split made all kinds of sense:
"Consumer products like entry-level printers and laptops are nothing more than a low-margin distraction for the more profitable business-class products. Splitting into a business-focused Hewlett and a consumer-oriented Packard might make me invest in the Hewlett stock."
All of this is still true. But I'm not sure I'll be interested in either one of the new HP stocks in the end. Whitman is doing it all wrong.
What's the problem?
You see, the new HP entities won't be cleanly separated. Whitman herself will be pulling the strings on both sides of the business split, leaving the entire business group nearly as unfocused as the old HP model.
Let me explain. Whitman will keep the CEO title on the Hewlett-Packard Enterprise side, handing off the chairman's job to current board member and former Alcatel-Lucent (NYSE:ALU) CEO Patricia Russo. At HP, Whitman grabs the chairman's title and gives the CEO job to Dion Weisler, who serves as executive vice president of essentially the same organization today.
The consumer business really won't see much of a change. Weisler already runs the day-to-day operations there, and this promotion is more of a title change than a substantial change to his work load. Holding on to her chairman's role, Whitman will still steer the new consumer company's strategy.
For the enterprise business, Whitman does hand over the strategic direction to a new name. On the other hand, she didn't pick a trusted lieutenant to run the daily business here. Instead, she'll get down to the nitty-gritty consumer business herself.
If the biggest problem with the old HP was that Whitman was tilting at too many windmills at once, then nothing much has changed. She'll still sit at the same overloaded plate, hoping to put her personal touch on all of HP's current businesses -- but under a new structure.
Moreover, the split will actually reduce her operating freedom. Shifting budgets and projects from one team to the other will be much harder under a strict two-company organization. So Whitman will do the same jobs as before, with at least a couple of fingers tied behind her back.
I fail to see how this is a good idea. Whitman seems more interested in micromanaging the entire company than in turning the sinking ship around. Otherwise, she would have done a clean break, jumping aboard one of the new businesses and leaving the other one pretty much alone. Give the complete-control reins one last look, then hand over a cohesive bundle of those strings to fresh talents.
So I'm afraid that the new, separated Hewlett-Packard will be just as conflicted and confused as the old version. If there is an upside to this sordid mess, it would be that the new companies can start looking for separate merger opportunities. For example, Lenovo might be interested in the consumer business, given its recent spending spree on American assets in that direction.
But that's another old idea that still hasn't seen the light of day. I don't think Whitman is interested in any truly game-changing moves like that, and I'll be watching both of the new HP stocks from the sidelines until I'm proved wrong.