Z, how many letters did you and Lawrence Kam write? Now they are talking about splitting HWP.
For Personal Use Only
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
March 2, 1999
Tech Center
H-P Plans Restructuring That May Split
Company Into at Least 2 Public Entities
By STEVEN LIPIN and DON CLARK
Staff Reporters of THE WALL STREET JOURNAL
Hewlett-Packard Co., which makes everything from personal computers to
medical instruments, is expected to announce a major corporate restructuring
that could break up the company into at least two separate publicly traded
entities, people familiar with the matter say.
A transaction, if completed, could rank as one of the biggest split-ups in
corporate history.
H-P, based in Palo Alto, Calif., wouldn't comment.
But people familiar with the matter say the
company, which has annual revenue of $47 billion
and a stock-market value of over $70 billion, is planning a major announcement
after the stock market closes Tuesday. In composite trading Monday on the
New York Stock Exchange, H-P closed at $65.875, down 56.25 cents.
H-P, one of Silicon Valley's most storied companies, was founded by engineers
Bill Hewlett and David Packard in 1938 in a garage. It began by selling audio
oscillators to Walt Disney Studios, and expanded into other technologies.
H-P was considered one of hottest big technology companies of the early
1990s, brilliantly building up high-volume businesses such as computer printers
that once seemed lost to Japan. It remains a leader in large computers, called
servers, that use the Unix operating system, as well as personal computers and
low-end servers that are based on Intel Corp. chips and Microsoft Corp.'s
Windows software. H-P also still has large businesses in test equipment,
medical instruments and related products.
Lately, however, several of H-P's cylinders have been misfiring. PCs have
produced market-share gains but low profits, due to plunging prices. The
company has been late to deliver some servers, resulting in market-share losses
to rivals such as Sun Microsystems Inc. and International Business
Machines Corp.
In its latest quarter, H-P said sales of Unix servers fell, while total sales edged
up only 1% to $11.94 billion. Revenue from test and measurement equipment
alone dropped 14%, compared with a year earlier.
Moves to Improve Focus
In recent years, companies ranging from AT&T Corp. to ITT Corp. to Dun &
Bradstreet Corp. and Tenneco Inc. have split up to create newly formed
companies focusing on one line of business. The goal of these moves is to
increase stockholder value, with the combined stocks of the broken-up
companies being worth more than the former parent company's stock.
AT&T, for instance, spun off the equipment-making business of AT&T into
Lucent Technologies Inc. and carved out the old NCR Corp. into a
separately traded company as well.
The stock market likes "pure plays," and spinoffs have been used by companies
frequently in the 1990s to get rid of weaker businesses and obtain better
multiples on newer companies.
H-P has underperformed the overall stock market significantly. According to
Baseline, a New York financial-data concern, shares of H-P are up about 17%
over the past two years, compared with a nearly 56% return for the Standard &
Poor's 500-stock index. An index of computer-hardware companies returned
137% in the same time period, according to Baseline data.
Pressure for Improvement
Lewis E. Platt, H-P's chairman and chief executive, has been under pressure to
produce better results. Given that situation, Mr. Platt has cut expenses and
improved H-P's profitability. But he has expressed exasperation with the lack of
progress on the company's revenue growth, stating that the first quarter showed
"we're not meeting our growth objectives."
The company hired the consulting firm McKinsey & Co. to examine strategic
alternatives, setting off widespread speculation that some sort of breakup was
possible. One obvious possibility is to spin off the company's test and
measurement business, which has different growth dynamics from the computer
business. But one person close to the company said H-P will likely try to stress
faster-growing markets, including Internet-related hardware, that could
command a premium on Wall Street. "They have to do something dramatic," he
said.
H-P gets about 86% of its sales from computer products, with about half of that
derived from printers and supplies such as toner. Test and measurement
equipment represents about 8% of sales, with medical equipment representing
about 3%.
-- Kara Swisher contributed to this article.
URL for this Article:
interactive.wsj.com
Hyperlinks in this Article:
(1) interactive.wsj.com
Copyright © 1999 Dow Jones & Company, Inc.
<<<<<<<<<<<<<<<<<<<<<<<<<
|
