What the Hewlett-Packard Split Means for HPQ Stock

Investors put their stamp of approval today (Monday) on the announcement that Hewlett-Packard Co. (NYSE: HPQ) is finally splitting itself up into two companies, and for good reason.

HPQ stock was up about 6%, to $37.37, in mid-day trading. Hewlett-Packard stock is up more than 33% for the year.

"This HP deal is a smart move that's good for shareholders," said Money Morning Defense & Tech Specialist Michael Robinson. "CEO Meg Whitman recognizes that these two businesses are on divergent paths."

The idea is to spin off the legacy printer and PC business into a company called HP Inc., while the corporate hardware, cloud, and software businesses will become known as Hewlett-Packard Enterprise.

The spin-off will create two publicly traded companies of approximately equal size, with revenues for each of about $56 billion.

Whitman will be CEO of Hewlett-Packard Enterprise and will retain a role at HP Inc. as nonexecutive chairman. Dion Weisler, the current head of the company's printing business, will become CEO of HP Inc.

Such a split was unexpected from Whitman, who reversed plans for a similar strategy when she was named CEO of HP back in 2011. However, the company was in disarray back then and would probably have botched any spin-off.

Now nearing the end of the third year of a five-year turnaround plan, Whitman told CNBC this morning that the time finally was right to split the Palo Alto, Calif.-based HP in two.

"Today is only possible because the turnaround has succeeded," Whitman said on the "Squawk on the Street" program. "We think this is the best tactic to continue this turnaround journey and position HP into two great new companies that are real scale and have a chance to make a real difference on a go-forward basis."

Current HP shareholders will receive shares in both companies on a tax-free basis at the time of the split, which the company said should be completed by the end of its fiscal year 2015 – just about one year from now.

But what about the prospects for these siblings? Is one a better investment than the other?

David Zeiler

About the Author

Browse David's articles | View David's research services

Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.

Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.

Dave has a BA in English and Mass Communications from Loyola University Maryland.

… Read full bio