It’s official: HP splits into two

HP on Monday said it will be broken into two new public companies — Hewlett-Packard Enterprise and HP Inc.

The following is the official press release from HP with some editing for faster reading:

Hewlett-Packard Enterprise will define the next generation of technology infrastructure, software and services for the new style of IT.

HP Inc. will be the personal systems and printing company delivering products that sill empower people to create, interact and inspire.

The company will take strategic steps to ensure focus, financial resources and flexibility to adapt to market and customer dynamics.

Highlights:

Hewlett-Packard Enterprise will build upon HP’s position in servers, storage, networking, converged systems, services and software as well as its OpenStack Helion cloud platform.

Meg Whitman will be president and chief executive officer of Hewlett-Packard Enterprise; Pat Russo will be chairman of Hewlett-Packard Enterprise Board.

HP Inc. will be the personal systems and printing company with a strong roadmap into new technologies like 3D printing and new computing experiences.

Dion Weisler will be president and chief executive officer of HP Inc.; Meg Whitman will be chairman of the HP Inc. Board.

Company reiterates fiscal 2014 non-GAAP diluted net earnings per share (EPS) outlook of $3.70 to $3.74 and updates GAAP diluted net EPS outlook to $2.60 to $2.64.

Company issues fiscal 2015 non-GAAP diluted net EPS outlook of $3.83 to $4.03 and GAAP diluted net EPS outlook of $3.23 to $3.43.

HP press release in detail

HP today announced plans to separate into two new publicly traded Fortune 50 companies: one comprising HP’s enterprise technology infrastructure, software and services businesses, which will do business as Hewlett-Packard Enterprise, and one that will comprise HP’s personal systems and printing businesses, which will do business as HP Inc. and retain the current logo.

Immediately following the transaction, which is expected to be completed by the end of fiscal 2015, HP shareholders will own shares of both Hewlett-Packard Enterprise and HP Inc. The transaction is intended to be tax-free to HP’s shareholders for federal income tax purposes.

HP leads HPC server market

Today’s announcement comes as HP approaches the fourth year of its five-year turnaround plan. Over this time, the company has executed against its turnaround objectives, keeping customers and partners at the forefront.

HP has reignited its innovation pipeline, strengthened its go-to-market capabilities, rebuilt its balance sheet, and inspired its workforce and management teams. The company is now positioned to accelerate performance, drive sustained growth and demonstrate clear industry leadership in key areas.

Meg Whitman on HP split

“Our work during the past three years has significantly strengthened our core businesses to the point where we can more aggressively go after the opportunities created by a rapidly changing market,” said Meg Whitman, chairman, president and chief executive officer of HP.

“The decision to separate into two market-leading companies underscores our commitment to the turnaround plan. It will provide each new company with the independence, focus, financial resources, and flexibility they need to adapt quickly to market and customer dynamics, while generating long-term value for shareholders. In short, by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders.”

Both companies will be well capitalized and expect to have investment grade credit ratings and capital structures optimized to reflect their distinct growth opportunities and cash flow profiles.

Management Structure

Meg Whitman, president and CEO of HP, and Cathie Lesjak, chief financial officer of HP, will hold these positions with Hewlett-Packard Enterprise.

When the separation is complete, Whitman will also serve on the Board of Directors of Hewlett-Packard Enterprise, and Pat Russo will move from Lead Independent Director of HP to Chairman of Hewlett-Packard Enterprise.

Dion Weisler, executive vice president of HP’s Printing and Personal Systems business, will lead HP Inc. as president and CEO. Whitman will serve as non-executive Chairman of HP Inc.’s Board of Directors.

Hewlett-Packard Enterprise

Hewlett-Packard Enterprise will have a portfolio and multi-year innovation roadmap across technology infrastructure, software and services to allow customers to take full advantage of the opportunities presented by cloud, big data, security and mobility in the New Style of IT.

By leveraging its HP Financial Services capability, the company will be well positioned to create unique technology deployment models for customers and partners based on their specific business needs. Additionally, the company intends for HP Financial Services to continue to provide financing and business model innovation for customers and partners of HP Inc.

Customers will have the same unmatched choice of how to deploy and consume technology, and with a simpler, more nimble partner. The separation will provide additional resources, and a reduction of debt at the operating company level, to support investments across key areas of the portfolio. The separation will also allow for greater flexibility in completing the turnaround of Enterprise Services and strengthening the company’s go-to-market capabilities.

HP Inc.

HP Inc. will be a leader in the personal systems and printing markets with exciting new technologies on the horizon. The new company’s profitability and free cash flow will enable investments in growth markets such as 3-D printing and new computing experiences. At the same time, HP Inc. will continue to execute against a well-defined and established strategic plan, ensuring continuity for customers and consistent value to shareholders.

“As the market leader in printing and personal systems, an independent HP Inc. will be extremely well positioned to deliver that innovation across our traditional markets as well as extend our leadership into new markets like 3-D printing and new computing experiences — inventing technology that empowers people to create, interact and inspire like never before,” Weisler said.

Transaction Details

The separation transaction is intended to be tax-free to HP shareholders for federal income tax purposes. The transaction is currently targeted to be completed by the end of fiscal 2015, subject to certain conditions, including, among others, obtaining final approval from the HP Board of Directors, receipt of a favorable opinion and/or rulings with respect to the tax-free nature of the transaction for federal income tax purposes and the effectiveness of a Form 10 filing with the Securities and Exchange Commission.

Financial Outlook

For fiscal 2014, HP reaffirms its non-GAAP diluted net EPS outlook range of $3.70 to $3.74, and updates its fiscal 2014 GAAP diluted net EPS outlook to be in the range of $2.60 to $2.64.

For fiscal 2015, HP estimates non-GAAP diluted net EPS outlook to be in the range of $3.83 to $4.03 and GAAP diluted net EPS outlook to be in the range of $3.23 to $3.43.

HP’s outlook does not include one-time GAAP charges the company is expected to incur in connection with the separation, including advisory and tax costs which will be quantified at a later date.

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