RealTime IT News

HP Board Ponders Another Shake-Up

HP may be set to undergo yet another corporate restructuring, according to published reports this week.

The company's Board of Directors is apparently fed up with HP's yo-yo earnings and No. 2 status, behind IBM in servers and Dell in PCs -- or so says a report in Monday's Wall Street Journal. Sources cited by the newspaper also suggest that chairman and CEO Carly Fiorina is not at risk of losing her job but may be freed of some of her day-to-day responsibilities.

The report follows HP's annual planning meeting earlier this month. The Board allegedly debated the company's management structure and an opportunity for a handful of senior executives to take on more responsibility and more accountability for their operating divisions.

An HP spokesman was quick to discount the Board's discussion of the company's management structure.

"Boards discuss a wide range of topics consistent with their fiduciary responsibilities, and any speculation about these discussions is just that -- pure speculation," HP spokesman Bob Sherbin told internetnews.com. "While the board did discuss structural changes at its recent meeting, these were announced on Friday, Jan. 14. There are no other senior changes due in the near future."

HP, which has steadily reorganized its business since acquiring Compaq in 2003, recently combined its Imaging and Printing Group and Personal Systems Group in order to trim costs and step up its growth in the $14 billion market for U.S. enterprise PCs.

The report follows suggestions this month by Merrill Lynch analyst Steven Milunovich that HP management break up the company within the next few years, whether computer margins recover or not.

In an investors' newsletter, the oft critic of HP said two splits are most likely -- either within HP's printers and computers or between its consumer and enterprise divisions. At the time, Merrill Lynch recommended the printer/consumer side keep the HP brand name, so the other group could make acquisitions and create a fresh identity.

Roger Kay, a senior analyst with IT research firm IDC, said the problem may not be HP's execution but a shift in perceptions about integrated vendors like IBM and HP that keep a full suite of technology under one roof

"The question is, do customers need to see that the technology is all in one portfolio, and, if they do, can HP supply it," Kay told internetnews.com. "With transactional customers, this level of integration is much less critical." Kay thinks that shareholders would lose money if the business were disintegrated. The PC business would deflate, and the printer business would have to fight a rear-guard action against Dell, which could combat HP with printers and PCs.

The mere mention of another corporate restructuring has put HP's stock in the losing category. The company's stock price was down 10 cents per share to $19.59 at the end of trading Monday. The stock has been down as low as $16.08 in the last year.