HP Breakup? Here Is What's Fueling the Chatter

Wednesday, 6 Feb 2013 | 2:29 PM ET
HP Breakup Coming?
Is HP considering a breaking up the company? CNBC Technology Reporter Jon Fortt has the latest on the rumor.

Hewlett-Packard's taken a wild ride over the past few hours.

Wednesday afternoon the stock spiked after hours on a report that the board was considering a breakup of the company among other options to maximize shareholder value. Hewlett-Packard officially had no comment on the report, but a source close to the company told me HP plans at this point to keep all of the company's businesses together.

No doubt, a couple of things have fueled the latest round of HP speculation—one, the news yesterday that Michael Dell plans to take his company private at $13.65 per share, in a transaction worth about $24.4 billion.

(Read More: Dell Reaches Deal to Be Taken Private by Founder)

The thing that brought Dell to this point? That's the second thing — the decline of the PC market. It shrank eight percent in the third quarter and another five percent or so in the fourth quarter, as tablets and smartphones have led people to delay PC purchases. That inevitably hurts HP, still the largest PC maker, because it doesn't have and significant presence in the mobile market.

Former HP CEO Fiorina: We Looked at Breakup
After a report Hewlett-Packard is considering a breakup of the company, former CEO Carly Fiorina tells "Closing Bell" that alternative was looked at, and rejected, when she was in charge. She does, however, think the current board should look at all its options.

That's why HP is now trading at a $32.7 billion dollar market cap, even though it pulled in $120 billion in revenue in fiscal 2012. The stock is down more than 40 percent over the past year as CEO Meg Whitman has struggled to articulate a turnaround plan that she says won't really begin to bear obvious fruit until 2014.

Some key questions going forward: Can HP roll out a viable mobile strategy at this point? Will the printing business continue to deteriorate along with the traditional PC market? And can HP restructure its enterprise services and product offerings to get better than mediocre margins?

If not, we can expect this breakup chatter to continue quarter after quarter until something gives.

—By CNBC's Jon Fortt; Follow him on Twitter: @jonfortt

email: tech@cnbc.com

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  • Matt Hunter is the senior technology editor at CNBC.com.

  • Cadie Thompson is a tech reporter for the Enterprise Team for CNBC.com.

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.

  • Jon Fortt is an on-air editor. He covers the companies, start-ups, and trends that are driving innovation in the industry.

  • Lipton is CNBC's technology correspondent, working from CNBC's Silicon Valley bureau.

  • Mark is CNBC's Silicon Valley/San Francisco Bureau Chief covering technology and digital media.