Hewlett-Packard has to win over sceptics on company split

Hewlett-Packard chief executive Meg Whitman appeared to be banking on growth markets like 3D printing and a trickle back in PC sales when she announced a spin-off for the company’s computer and printing business. But some on Wall Street are sceptical.

Investors and analysts generally gave a thumbs up on the move to separate HP’s computer and printing business from its corporate hardware and services operations. Yet some questioned the plan, announced on Monday, expressing doubt over whether the newly christened “HP Inc” can break out of what appears to be a terminal slump in desktop computing.

“HP Inc will be a fairly good cash-generating machine but growth will certainly be a struggle,” said Brian Fox, a portfolio manager at Standard Life Investments. “There’s not a whole lot they can do to improve that growth profile.”

The split does create a company with strong cash flows, a high dividend yield and a major market position. At the same time, though, it may raise operating costs over the longer term, and together with abortive talks to merge with EMC, it could reflect HP’s inability to grow profits organically, according to Bernstein analyst Toni Sacconaghi.

Global shipments of PCs are in for “slow but consistent” growth over the next few years, forecasts technology research firm Gartner, as they recover from three years of declines caused by a surge of tablets and smartphones. But they are still not expected to equal their 2011 peak until 2018 at the earliest.

Moreover, that growth is not expected to come from HP’s mainstay of desktops and laptops, but from a new breed of mobile computers such as Apple’s MacBook Air, Google-powered Chromebooks and Microsoft’s Surface Pro.