In my post on corporate breakups, I looked at the value and price consequences of breakups. Since that post was triggered by the news stories about HP and eBay splitting themselves, I though it would make sense to put those companies under the microscope, to see if they are good, neutral or bad candidates for the breakup story. In this post, I will focus on Hewlett Packard, a company with a long and rich history as a technology company, that has been a case study on bad corporate governance, the dangers of overpaying for acquisitions and the perils of bad accounting for the last few years.
HP: From a bad past to a better future?
The last decade has not been a good one for Hewlett Packard. During the period, the company has not only seen its core businesses (computers, printers, business services) come under assault but it has also had self-inflicted wounds from corporate governance failures and terrible acquisitions. I posted on one of those failed acquisitions (Autonomy) a while back and you can read the post here.
Meg Whitman, who made her reputation by building up EBay, joined the board of directors at HP in 2011 and became CEO in September 2011, with the promise that she would turn the company around. Ironically, she was instrumental in rejecting an earlier plan to break up the company, arguing that the company was “better together”. In the last three years, Whitman has toiled with mixed results on both the profitability and the stock price front. HP’s revenues have declined in the last three years and its margins are under pressure: