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HP layoffs, split-off apparently all good with industry watchers

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With HP and Hewlett-Packard now officially two different entitites, investors and analysts have had time to fire off on whether or not shearing off part of the company is a good thing.

HP had been encouraged to spinoff its consumer hardware industry since as early as 2011, but now CEO Meg Whitman has announced the company's primary operations will each be given a pair of legs. She said the transition is expected to be complete by October 2015. The business-oriented company will be called Hewlett-Packard Enterprise, while the PC and printing company will be called HP Inc.

"In short, by transitioning now from one HP to two new companies, created out of our successful turnaround efforts, we will be in an even better position to compete in the market, support our customers and partners, and deliver maximum value to our shareholders," says Whitman.

Whitman says the move is a fourth-year step in her company's five-year plan to turn things around. Shareholders' investments will be split across the two halves when the transaction is complete.

The increased agility HP aimed for with the splitting of it primary businesses brought another trimming of personnel, bringing its announced layoffs up to 55,000 from the 50,000 it previously disclosed. Despite the ugly side of the spinoff, investors and financial analysts are largely showering the news in praise.

Ralph V. Whitworth, founder of Relational Investors and a former HP chairman, praised the agility given the company's two sectors, noting  investors will have the ability to invest in the half they believe in the most.

"HP's board and management have made a brilliant, value-enhancing move at the perfect time in the turnaround," says Whitworth. "The new companies will be better-positioned to address today's light-speed market dynamics and customer needs, and with distinct and compelling financial profiles and strong leadership teams, accelerate growth and shareholder value creation."

On the evening of Whitman's announcement, HP's stock closed at $36.87 per share, up 4.74 percent from the end-of-day trading on Friday, Oct. 3. It was a boon for stocks that took a dive in September and evidence of just how much Wall Street appreciates HP's decision to split itself down the middle.

"We like the spin and believe it could create additional value over time," says UBS analyst Steven Milunovich. "In our view, focus is more important than synergies, and it is hard to be good at both consumer and enterprise computing."

Amid all of the investor jubilation, tech analysts have put into perspective what the news means for the PC and consumer side of HP. Gartner Research is expected to report yet another quarter of stagnation in the PC market and one of the firm's analysts just doesn't see a bright side for HP's PC side.

"There's no real upside in terms of the PC side," says Ranjit Atwal, PC analyst at Gartner. "Along with printers, it's a commoditized business that doesn't feature in HP's 'solution-based' approach."

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