Meg Whitman is Turning HP's Painful Split Into a Sales Tactic

On Sunday, Hewlett-Packard split into two companies: Hewlett Packard Enterprise, which sells hardware, software and services to companies, and HP, which hawks printers and PCs to consumers. An analyst, talking to the press about the historic separation, explained just how long the companies had to prove that this made sense. “The window of opportunity is closing," FBR Capital Markets’ Daniel Ives told Bloomberg. He gave them six to nine months to "show that there’s a pulse."

I kept thinking about this image — Wall Street hovering over the patient and expecting the worst — when Meg Whitman came by LinkedIn’s NYC offices to explain HP’s bold bet. Whitman is the CEO of HPE, formerly the CEO of HP and the person who over the last half-decade has spent the most time thinking about how to make the pioneer of Silicon Valley great again. The breakup was her decision and she guided everything that came with it: what in the end will be 85,000 layoffs since 2011, the sorting of 700 legal entities across 120 countries, the soothing of suppliers and customers, the creation of two new brands while preserving the history of one common brand and more. With the separation, she was promising to go “further, faster;” the new HPE, she said, would make decisions quickly and be entrepreneurial at the core. (Read her post about the re-launch(es): “Starting a New Job.”) Two new companies were being born — but investors were already readying their obits.

Over the course of our talk, Whitman explained why she thought the naysayers would be proved wrong — watch revenue growth; that’s what she’s focused on  — and how the company is using the lessons it learned from breaking up to win new customers. (In a coming video, she talks about how she plans to compete against the nimble Amazon and the suddenly-huge Dell in winning over CIOs. Stay tuned.) She talked about the emotional hit the employees took when being told that the company they worked for would be cleaving. And she explained how the two sides of HP would continue to cooperate: from supplier agreements to regular 1:1 meetings.

Some highlights:

On how customers have approached the breakup:

I think it makes sense to them. When we announced the split, you know you're on to something when people go, "I get it." As they say in politics, “When you're explaining, you're losing.” [Laughs.] And we were not explaining here.

On how she’ll judge success:

When you're the CEO of a public company — and Dion Weisler will be the CEO of HP Inc. —I mean, we perform in the marketplace every day, right? We're judged every quarter.

My view is on the Hewlett Packard Enterprise side is that we have to return the growth. Growth will be the metric of success in 2016 in constant currency.

The good news is in Q3, if you just took the revenues from what is today Hewlett Packard Enterprise, we actually grew in Q3 and we have to continue that trajectory right through 2016, and that will be a big milestone for the company.

On how the split plan evolved:

I joined HP in the fall of 2011 and my predecessor had announced that maybe we were going to spin the PC business. Not PCs and printers, but just PCs. My first decision as a new CEO was "Did I think that was a good idea or not?"

I did a 90-day study and I said, "You know what? We have to keep this together." The company was so challenged by so many CEOs, board issues, all kinds of things, we wrote down the Palm acquisition, lots of things, and I said it's better to stabilize the company, get everything back organized, and then we'll see where we go.

We embarked on a five-year turnaround journey. We're four years through. About a year and a half ago, I said to the board, "All right. We have to figure out how we're going to accelerate this turnaround; [here’s] my recommendation.” Then we had a four, five-month debate about if we separate the company, will we be able to accelerate the turnaround for each of these two companies?

On the human side of splitting:

Well, the first reaction is raw emotion. We've been together for 75 years. This is one of the great companies in all of American business history. There's quite an emotional reaction…

We really accelerated telling the functions where they were going to go and who was leading what. Frankly, it was actually an incredible promotion opportunity for people because we needed two CFOs. We needed two general counsels. We need two head of IRs. So there were a lot of people who got a promotion out of this separation as well, but it was important to tell them that.

On how they split up the history of HP between the two new companies:

We have joint ownership over the garage, which is sort of the iconic history of the company, and then Bill and Dave's original offices are up in Dion's area, but it goes out on to a patio, so if we want to use that patio and the offices, we can.

On what other companies should consider before copying HP:

First of all, you have to decide it's the right thing for your company, strategically. Are you running two different businesses? In sort of classic business definition, it's: different customers, different competitors, and different cost structure.

If you are, are you going to be advantaged by being two smaller companies? Can you take advantage of the two different markets or three different markets? Does it make strategic sense?

If it does, then you cannot underestimate the amount of work that it takes to separate these companies, particularly big, iconic, long-lived companies. I mean, as I said, the IT separation alone was remarkably complex… I would just say, do not underestimate how much work this takes.

By the way, if you decide to do it, you should hire us to do your IT separation.

Addendum 10/10: A few commenters have pointed out the echoes to HP's spinoff of Agilent in 2002. Totally agree. I spent some time with the company for a 2002 feature— "How to Cut Pay, Lay Off 8,000 People, and Still Have Workers Who Love You You" — a common theme in all of my interviews was how eager the employees were to retain a connection to founders Bill and Dave. 

Also, here's another clip from the interview, in which Whitman says politics are out of her system, sort of...

Lower Photo:  Dave Kotinsky / Getty Images

Click here to read Meg Whitman's post: Before Separating Your Company, Ask Yourself These Three Questions