HP's CEO Meg Whitman will be head up of the enterprise IT company, and will be chairman of the PC and printing company. Dion Weisler, head HP's printing and PC group, will be CEO of that company and Patricia Russo, an HP director, will be chairman.
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The transaction will be structured as a distribution of shares to current HP shareholders.
Here's why this is happening: HP has in recent months sale of several business units without success, sources tell Re/code.
In a process led by Morgan Stanley, HP approached both Lenovo and Dell about the possible sale of its $32 billion (2013 sales) PC operation. In both cases it was rebuffed.
In another case, HP approached two India-based companies, Wipro and Infosys about the possible sale of its $28 billion IT services unit, known as Enterprise Services. Again it was rebuffed.
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In a third case, it approached IBM about the sales of its $1.2 billion Business Critical Server business, but was turned down.
Essentially every business unit within HP was evaluated for possible sale or divestiture, in a process known as "asset optimization." It's unclear how far HP got in talks with any of these outside companies, or whether or not they reached a formal phase.
The move comes as Whitman is beginning her third year as HP's CEO, and past the mid-way point of what she has described as a roughly five-year process to turn the company around.
HP also recently explored a strategic merger with data storage company EMC that would have created a $130 billion technology giant. In contemplating that proposed merger, HP was interested most in VMWare, the cloud software company which EMC controls.
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The merger talks failed mainly because EMC wanted a higher valuation than HP was willing to pay. One other reason the talks may have failed was that HP and EMC viewed the declining PC and printer divisions as a drag on the combined operations, sources say. A split into two companies might set up a scenario down the road where HP and EMC re-open those merger talks combining the enterprise company with EMC.
The move would be a return to a strategic plan that HP's prior CEO Léo Apotheker proposed in 2011, but which Whitman shelved after she took over as CEO in September of that year.