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HP positions itself as a nimble two-headed monster

In an unexpectedly bold move HP breaks itself in two hoping the server company can better compete against IBM for a larger slice of the enterprise pie.

HP's bold move to split itself into two companies is a gamble to keep pace with the rapid changes in IT, which are heavily geared toward software and services. If it succeeds, it could potentially reap big rewards for itself and its customers. If it fails, it could drop from the top tier of enterprise suppliers. 

The newly-formed Hewlett-Packard Enterprise (HPE) will focus on selling the company's Intel-based servers, server-based storage and networking products and its portfolio of cloud-based software and services. The new company is expected to continue to focus on cloud, big data and mobility in what HP has referred to as the "new style of IT." 

If the breakup means lower pricing for HPs higher-end servers, customers said they would be willing to expand their quarterly budgets. But others who purchased servers and PCs as part of integrated solutions from the now two separate companies, had concerns over service and support issues that might fall between the cracks.

"It is perhaps short-sighted, but I look at what savings can go into my pocket as a result of this," said an IT pro with a large manufacturing company in St. Paul, Minn. "I hope HP's services organization makes the necessary transition to support users with bundled deals involving servers and PCs." 

Customers don't see HP's move as having an influence over their daily IT operations in the short term. They do, however, welcome any positive changes. 

"I can't believe splitting the business is going to have any impact on most IT shops, because most enterprises move like glaciers anyway," said Mike Drips, a solutions architect with WiPro, Inc. in Houston. "It will be business as usual for some time. Maybe the biggest inconvenience is some [IT people] might have to find new numbers for HP contacts." 

One analyst doesn't think the separation of the server and PC divisions will hurt IT shops. As customers gradually pursue newer endpoint strategies that better accommodate cloud applications and services, closely tying servers and traditional desktops won't be a priority.

"What we used to think of as synergies between PCs and the data center is rapidly dissolving," said Dana Gardner, principal analyst with InterArbor Solutions, Inc. in Gilford, N.H. "There is going to be a lot more emphasis on VDI, software as a service and desktop as a service, where traditional desktops might not play as well." 

The 800 lb. Microsoft gorilla 

The breakup may create a dilemma for HP and its relationship with Microsoft, Gardner said. Microsoft supplies HP with the operating system for the vast majority of its PCs, which should deepen the relationship with HP Inc., the newly created PC and printer company.

As for HPE, its focus will be on its Helion cloud environment and, secondarily, on Microsoft's Windows Azure cloud environment. This might put the two companies in competition. 

"HP has a deep partnership with Microsoft on the PC side but not so much on the cloud side," Gardner said. "I think HP may help users with Azure issues but there will be much more competition within this critical partnership on the data center and infrastructure side." 

HP is also significantly more focused on putting together converged and hyper-converged infrastructure products that bundle its server hardware with the cloud and software products of a number of smaller developers. Microsoft, of course focuses on Windows-centered integrated offerings. 

"The data center has become more about converged systems where selling a Windows license has a lot less to do with convergence," Gardner said. 

By separating its businesses, HP follows somewhat in the footsteps of its chief enterprise rival, IBM. While IBM sold both its desktop PC and low-end server businesses to Lenovo, both companies have unloaded lower margin businesses so they can have their full attention on higher margin businesses. 

When the deal is completed, which won't be until October 2015, Meg Whitman, the President and CEO of HP, will have the same title with HPE. Whitman will also serve on the Board of Directors of Hewlett-Packard Enterprise

Dion Weisler, the Executive Vice President of HP's Printing and Personal Systems business, will take over as President and CEO of HP Inc. Whitman will serve as non-executive Chairman of HP Inc.'s Board of Directors. 

To learn how HP’s decision to split into two impacts its PC business, click here.

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