HP threatens to axe units that fail to meet targets

By Sooraj Shah
02 Jan 2013 View Comments
Taking an axe to budgets

HP has confirmed that it will wield the axe on those of its businesses that don't meet targets, official documents have revealed.

As first reported by Bloomberg, HP told the US Securities and Exchange Commission in a 27 December filing that it would "continue to evaluate the potential disposition of assets and businesses that may no longer help us to meet our objectives".

Further reading

However, the filing goes on to warn that disposing of business units carries risk.

"When we decide to sell assets or a business, we may encounter difficulty in finding buyers or alternative exit strategies on acceptable terms in a timely manner, which could delay the achievement of our strategic objectives. We may also dispose of a business at a price or on terms that are less desirable than we had anticipated," HP said.

The filing comes on the back of a tumultuous three-year period in which HP has had three different CEOs in as many years.

In August 2011, then HP CEO Leo Apotheker – who took over from Mark Hurd in 2010 – said that the company would spin off its PC business and also announced the now controversial acquisition of enterprise search firm Autonomy for $10.24bn (£6.2bn). In addition, HP said at the time that it would discontinue its WebOS devices after struggling to compete with Apple's iPad.

These announcements were criticised for being confusing and were held partly responsible for a 43 per cent slump in HP's share price in 2011. Apotheker was replaced by Meg Whitman in September of that year.

But the problems continued for the ailing firm in a gloomy 2012. In May, it announced that it would cut 27,000 jobs by 2014 in a "productivity initiative". In August, HP revealed a colossal quarterly loss in its third fiscal quarter after writing down $8bn (£5.1bn) on its services arm, largely as a result of its poorly timed $13.9bn (£8.8bn) purchase of IT equipment and services provider EDS in 2008. Then in October, the firm's shares plummeted to a nine-year low.

HP's current strategy is to shift away from its focus on printers and PCs, even though it is the world's largest maker of these products, to become an enterprise computing company, similar to IBM.

TechMarketView analyst Richard Holway suggests that the reason IBM is faring well is because it knows how to axe its unprofitable businesses.

"IBM is very good at killing off bits of itself, for example selling its PC business to Lenovo. But cutting off your limbs to save the rest of you is as painful to a corporation as it would be to any human," he warned.

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