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HP’s Meg Whitman changes her tune

Hewlett-Packard, led by CEO Meg Whitman, is splitting into two companies. (POOL - REUTERS)
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The news that Meg Whitman is splitting HP into two companies is historic. The venerable Silicon Valley institution was founded in a Palo Alto garage in 1939 and is often seen as the company that kickstarted the digital age, transforming an agricultural area of California into a hotbed of innovation and technology.

But the split is not a new idea. Some analysts have long argued for it and Whitman's predecessor as CEO, Leo Apotheker, floated the idea of spinning off the PC business back in 2011, just before getting fired.

Whitman has repeatedly rejected the idea herself. She shelved it three years ago after becoming CEO ("First and foremost, H.P. is a hardware company," she said at the time) and spoke out against it as recently as last year ("I am convinced that we should not break up this company," she told CNBC in early 2013). 

Now, Whitman is changing her tune, swallowing her pride, and saying the best thing for the company is the very thing she initially opposed. That can't be easy. In doing so, she shows how delicate the communications tightrope is that every executive walks. Investors want, and deserve, to hear clear statements about a company's strategy. But once they're explicitly made, they can also come back to haunt the person who spoke.

In an announcement Monday, which was first reported Sunday by the Wall Street Journal, the company said it will carve itself in two, forming Hewlett-Packard Enterprise and HP Inc. Whitman will lead Hewlett-Packard Enterprise, which will include the company's tech infrastructure, software and services products. Current HP lead independent director Pat Russo will be chairman. HP Inc., meanwhile, will include the company's PC and printing products, and be led by current HP executive Dion Weisler. In an interesting twist, Whitman will retain power at that company, too, becoming its chairman of the board.

Whitman's answer for why the company needed to be split now, rather than previously, is that the company was not in a position before now to be divided. "Three years ago, you will recall this company was in a fairly difficult position," she is said to have told analysts on a Monday conference call. In a CNBC interview, Whitman said she had "to get HP in fighting shape" and that there was a "tremendous amount of repair work" to be done. "Frankly," she said, "before a few months ago we were not in the right position to do this."

Indeed, Whitman has had her work cut out for her. When she took over in 2011, shares were at a six-year low. She's had to deal with the ill-fated acquisition of the software maker Autonomy, a deal that resulted in a massive 2012 writedown and prompted investor lawsuits. And she inherited a company laden with years of change and turmoil in both the boardroom and the C-suite — Whitman was HP's fourth CEO in less than seven years, and each of her three predecessors had been ousted.

How much faith will investors have now in her declarations about strategy? We'll have to see. And will splitting up the company fix HP's issues? On that, the jury is out, too. Some analysts said the move made sense, even calling it "bold and smart," while other watchers are doubtful. Investors, at least, appeared more assured — HP's stock rose more than five percent on the news.

Whatever happens, Whitman's willingness to swallow her pride and change her tune at least seems better than doggedly moving forward out of ego or overconfidence.

Read also:

Boards don't know their next CEOs

Meg Whitman: Governing the state of HP

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