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Silicon Valley granddaddy HP readies breakup

Sophie Estienne

San Francisco (AFP) - Seventy-seven years after Bill Hewlett and Dave Packard began tinkering in a Palo Alto garage, the company that became the foundation for Silicon Valley is breaking up.

Hewlett-Packard on Sunday officially splits into two entities, opening a new chapter for the US technology legend.

The computer colossus is being divided into HP Enterprise, focusing on software and business services, and HP Inc, which will keep the personal computer and printer operations.

The aim is to develop a sharper focus both for the enterprise unit and the PC-printer division that made it a household name but has become fiercely competitive and less lucrative in recent years.

The new structure splits off the computer arm that became for a time the world's biggest PC maker following the HP 2002 acquisition of Compaq.

The controversial deal was engineered by then-chief executive Carly Fiorina -- now running for the Republican nomination for president.

Tom Bittman, analyst at the research firm Gartner, said the current tech landscape calls for this approach, with flexibility more important than size.

"The market right now needs to move in this kind of direction, more focused, and more nimble, than in Carly Fiorina era, when competing with IBM, not Amazon, was critical," Bittman told AFP.

It remains to be seen whether the breakup will revitalize a company that has been in a defensive, restructuring mode for several years as it lost ground to rivals like Chinese PC maker Lenovo, and as tech sector leadership was taken over by mobile-focused Apple and Google.

"A split in itself is not a good or bad thing, it's what they do with it," Bittman said.

The new HP Enterprise will be led by company CEO Meg Whitman and the PC business by Australian native HP executive Dion Weisler. Both firms begin trading independently Monday on Wall Street.

- Faded star -

HP has long had a special place in the hearts and minds of Silicon Valley.

Founded by two Stanford University graduates, the company has been a major benefactor to the school seen a source of many innovative startups, including Google.

The garage where the company began has been designated a California historic landmark.

HP also led a number of workplace innovations including flexible schedules and the open-space office.

But today, the company is often seen as a dinosaur overtaken by younger, more dynamic startups.

The company has been in transition since dumping Fiorina in 2005.

Fiorina's successor Mark Hurd left in 2010 amid allegations of sexual harassment.

The next CEO, Leo Apotheker, was set to get rid of the PC business before he departed. But he led a $10 billion deal for Autonomy that became the object of lawsuits and probes into accounting irregularities at the British software firm.

The market value of HP today is roughly $50 billion -- less than half of its annual revenues -- compared with nearly $300 billion for Facebook, $500 billion for Alphabet and almost $700 billion for Apple.

Some on Wall Street parlance see opportunity in the breakup because HP's stock has been beaten down by concerns about its ability to compete.

The breakup into two separate companies "will unlock value for shareholders, as it allows each separate company to better focus on their core markets," said Deutsche Bank analyst Sherri Scribner in a research note.

Peter Burris at Forrester Research said the new structure offers an opportunity after numerous missteps by the company.

"Compaq was a portfolio of a lot of underperforming companies. It didn't serve HP's shareholders and customers as well as it might have," Burris said.

"History has shown that HP could have spent its time differently."

More recently, Burris said the company "has been showing signs of life on the execution front" but "it has to dramatically accelerate its execution and get the job done."