Hewlett-Packard Corporation Breaks Up Old Companies After Division

    After the division of Hewlett-Packard Corporation into two companies, the business of each of them is not easy. So far, business restructuring has not yielded positive results.

    Printers and personal computers are gradually losing popularity, they are increasingly being replaced by mobile devices. But it was the desktop that brought most of the revenue to HP Inc (now it is an independent company that arose after the division of the corporation). In October, the fourth financial quarter of the company ended. Sales of printers and PCs decreased by 14% compared to 2014, and the company worsened its profit forecasts both for the next quarter and for the whole coming year.

    After the separation, HP Inc’s profit from highly profitable printer sales will no longer be spent on corporate IT business, which will be engaged in the new company Hewlett-Packard Enterprise ( HPE ). The released funds will go to increase the percentage of revenue that HP spends on research (the combined company spent only 3.1%). In addition, most of its profits are HP Inc. will return to shareholders in the form of dividends.

    HP management plans to take additional steps to reduce costs. It was previously assumed that the company will reduce 3,300 jobs in the next three years, but now the plan has been revised - the reduction should occur within one year. Moreover, the number of laid-off employees may be even greater. HP CEO Dion Weisler hopes the company will improve with the release of a new 3D printer in 2016.

    Rival IBM has invested billions of dollars in developing its own cloud infrastructure. HPE shuts down its cloud business. Many cloud services in the world run on equipment that is not in the HPE portfolio. In this situation, the company is easier to use a ready-made software and hardware platform. HPE CEO Whitman announced on TuesdayPartnership with Microsoft , as a result of which the Microsoft Azure cloud service should become the main cloud platform for HPE. So far, the company is focusing on serving customers using its computers.

    The partnership between HP and Microsoft will affect not only the public, but also the hybrid cloud. Margaret Whitman argues that a strategic agreement was concluded between the companies, since both technology giants have a similar vision of hybrid technologies for business, and also perceive their cooperation as an opportunity to simplify hybrid infrastructure for greater user convenience.

    Together, Microsoft and Hewlett Packard Enterprise can try to challenge Amazon Web Services ( AWS), which is the undisputed leader in this segment.

    On the other hand, “customers want us to help them learn cloud technology,” says Whitman. “Very few companies have completely switched their applications to public cloud services.” This means that from this point of view, HPE equipment can be quite popular in the market. At the beginning of the year, while still unified, HP has stepped up the supply of low-cost servers to cloud service providers. According to Whitman, these efforts are paying off: sales of servers based on Intel processors grew by 5% compared to last year.

    Of course, this growth looks insignificant in comparison with the pace of development of the cloud technology market as a whole - its growth amounted to 78%, Vedomosti writes .

    According to a previously published forecast, Hewlett Packard Enterprise's annual revenue should exceed $ 50 billion. The reduction of 30 thousand workers and measures for restructuring the business will provide the company with annual savings of up to $ 2 billion, which in the long run will achieve long-term operating profitability of 7-9%.

    The company is trying to focus on the most profitable areas of the business, and its forecast for the coming year generally coincides with the expectations of analysts. In the current quarter, earnings are projected at 33–38 cents per share, while analysts surveyed by Thomson Reuters expected an average of 42 cents per share.

    Prior to the split, HP's revenue fell for 16 of the past 17 quarters. After the separation, the revenue of individual companies is expected to change slightly. HPE generated $ 14.1 billion in revenue in the recent quarter, and $ 12.7 billion in revenue from HP. Analysts polled by Thomson Reuters predicted $ 13.5 billion and $ 12.9 billion, respectively.

    HPE stock prices fell 1% on Tuesday to $ 13.69. HP shares fell 8% to $ 13.50.

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