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Hewlett-Packard Company's (NYSE: HPQ) plan to split itself into two companies will offer greater management focus and more flexibility to pursue mergers and acquisitions, analysts said Monday.
Under the plan confirmed Monday, a new business technology company will offer data storage and services, while another, separately traded company continues to sell personal computers and printers.
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Hewlett-Packard closed Monday up 4.7 percent at $36.87 per share.
Hewlett's revenue from PCs fell 10 percent to $32 billion in the face of competition from smartphones and tablets, while its business group's revenue fell 5.4 percent.
A similar breakup plan was unsuccessfully proposed in 2011 by former Chief Executive Leo Apotheker.
Credit Suisse's Kulbinder Garcha upgraded the company to Outperform, but said its computer business remained pressured from smartphones and tablets, while its business oriented operations "still needs a degree of transformation, possibly through an M&A."
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Garcha raised his target to $45 from $35.
Wells Fargo's Maynard Um maintained an Outperform rating on Hewlett and said the move will sharpen managements' focus on two divergent businesses while making both more nimble. It may also presage a more active news flow from the company regarding both divestitures as well as mergers and acquisitions Um said.
FNB Securities' Shebly Seyrafi called the breakup "a slight positive" by enabling "more focused management" and boosting opportunities for mergers and acquisitions.
Hewlett reportedly ended recent merger talks with EMC Corporation (NYSE: EMC) that would have created a company worth $130 billion.
Seyrafi called HP's announced split "incrementally positive" for EMC's stock, although its shares fell slightly on Monday.
Activist shareholder Ralph V. Whitworth, who stepped down from the company's board earlier this year for health reasons, called the breakup a "brilliant value-enhancing move"
Whitworth said shareholders "will now be able to invest in the respective asset groups without the fear of cross-subsidies and inefficiencies that invariably plague large business conglomerates."
Separately, the company also boosted its targeted job cuts to "at least 55,000" from a previous 45,000 to 50,000 jobs. Garcha figures that will save about $1.8 billion.
Hewlett had 317,000 employees last year, and had trimmed that by 36,000 as of July.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.